Pennyfeathers Ltd and others v Pennyfeathers Property Company Ltd and others

Neutral Citation Number: [2013] EWHC 3530 (Ch) Case No: HC11C03068 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Royal Courts of Justice Strand, London, WC2A 2LL Date: 19/11/2013 Before : MRS JUSTICE ROSE – – – – – – – – – – – – – – – – – – – – – Between : (1) PENNYFEATHERS LTD (2) JOHN ROBERT STEER (3) ROBERT IRWIN TAYLOR Claimants – and – (1) PENNYFEATHERS PROPERTY COMPANY LTD (2) PAUL ATTWELL (3) RAE BOWDERY (4) TRIMOUNT RESIDENTIAL ISLE OF WIGHT LTD Defendants – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – PATRICK LAWRENCE Q.C. and MICHAEL RYAN (instructed by FIELD FISHER WATERHOUSE LLP) for the CLAIMANTS ROBERT LEVY Q.C. and NEIL MCLARNON (instructed by GROSVENOR LAW) for the DEFENDANTS Hearing dates: 8, 9, 10, 11, 14, 16, 17, 18 & 22 OCTOBER 2013 – – – – – – – – – – – – – – – – – – – – – Judgment Mrs Justice Rose: This claim arises out of the proposed development of a large plot of land on the Isle of Wight, to the southeast of Ryde. The land is known as Prestwood Grange Farm and Bartletts Green Farm (the Farm) and comprises 76 acres. The First Claimant (Pennyfeathers UK) was set up by the Second and Third Claimants (Mr Steer and Mr Taylor) to exploit the opportunity to develop the Farm. The Claimants allege that the Second and Third Defendants (Mr Bowdery and Mr Attwell), at a time when they were directors of Pennyfeathers UK, acted in breach of their fiduciary duties towards Pennyfeathers UK by causing their company the First Defendant (Pennyfeathers Jersey): to contract with the owner of the Farm on terms which were in their own interests and contrary to the best interests of Pennyfeathers UK; and to enter into options over land surrounding the Farm when those options should have been acquired by them on behalf of Pennyfeathers UK. In 2001 the Farm was owned by Mr Ian McDowall and had in the past been used as a dairy farm. Before 2001, there had been some friction between Mr McDowall and local residents; an action group was formed, the Local Government Ombudsman had become involved and the Council of the Isle of Wight was considering what to do. A local estate agent mentioned the Farm to Mr Steer as having potential for development. Mr Steer contacted Mr Taylor with whom he had been friends for many years and who had more experience in land development. The two men visited the Farm in January 2002 and met Mr McDowall. In 2002 Mr McDowall granted Mr Steer and Mr Taylor an option over the Farm and an application for planning permission was made in April 2003. That application was unsuccessful. Despite this setback, Mr Steer and Mr Taylor continued with the plans for developing the Farm. On 13 April 2005 Mr Taylor and Mr Steer entered into a new option agreement with Mr McDowall (the 2005 Option). The 2005 Option was a substantial document covering 52 pages of terms. The relevant clauses for our purposes (referring to Mr McDowall as the Seller and Mr Steer and Mr Taylor as the Buyer) were as follows: By Clause 2.1, the Seller granted to the Buyer the option of purchasing the Farm or any part of it at any time between 13 April 2005 and 10 August 2010 at a price calculated as (A B C) x 80 per cent, where A was the open market value of the area to be developed, B was the costs of development and C was 50 per cent of the professional fees. By Clause 3.1 the Buyer had to use reasonable endeavours to obtain planning permission for the Farm as soon as possible. By Clause 4.1 the Seller was prevented from making any planning application himself or allowing anyone other than the Buyer from making a planning application in respect of the Farm. By Clause 4.2 and 4.3 the Seller had to provide all reasonable assistance and support to the Buyer as requested by them and was prevented from doing anything that delayed, hindered or prejudiced them in the performance of their obligations under the agreement. By Clause 13.1 the Seller undertook not to deal with or dispose of the Farm other than subject to the agreement and to require anyone to whom he transferred the Farm to enter into a deed covenanting to observe and perform his obligations under the agreement. The Seller was also prohibited from granting a new lease, tenancy, licence or easement affecting the Farm without the prior written consent of the Buyer. Clause 16 provided: 16.1 The Buyer may (subject to the Buyer having obtained the prior written approval of the Seller which approval shall not be unreasonably withheld or delayed) either assign the Buyers interest under this Agreement or 16.2 Execute a Declaration of Trust in favour of any company or individual of no less financial strength than the Buyer at the date of the Agreement 16.3 It shall be a condition precedent to any Assignment or Declaration of Trust that each assignee or Beneficiary (as the case may be) shall have delivered to the Sellers Solicitors a deed (to be prepared by the Buyers Solicitors) containing covenants by the assignee or Beneficiary (as the case may be) in favour of the Seller to observe and perform the obligations on the part of the Buyer contained in this Agreement In late 2005/early 2006 Mr Steer and Mr Taylor realised that the project was too large for them to finance themselves. They approached Mr Attwell whom they had both known for many years and who was interested in becoming involved in the project. Mr Attwell in turn introduced them to Mr Bowdery who had experience in the construction industry and was said to have access to funding. Mr Taylor also brought in a business colleague of his, Derek Donnellan, who used to work for Bank of Ireland. Mr Donnellans role was to sort out the business structure and to handle more formal matters as well as contributing more generally to ideas for developing the Farm. He was better able than Mr Taylor and Mr Steer to draw up legal documents and draft letters and minutes of meetings in appropriate language. Mr Donnellan operated through his company Market Distribution Solutions Ltd (MDS). Mr Donnellan incorporated Pennyfeathers UK in June 2006 as the vehicle which would take forward the Farm project. Pennyfeathers UK had an authorised share capital of 1000 ordinary shares of which Mr Taylor and Mr Steer had 480 shares each and Mr Donnellan held 40 shares. Mr Attwell and Mr Bowdery have worked together on developments in the past. Mr Bowdery already had a company called Trimount Residential Ltd which he had used as a vehicle and at the end of November 2006, he and Mr Attwell set up a new company Trimount Residential (Isle of Wight) Ltd, the Fourth Defendant (Trimount). The five men met in June 2006 to discuss how Pennyfeathers UK would operate and to appoint officers of the company. On 10 January 2007 a Shareholders Agreement was concluded relating to Pennyfeathers UK. The parties to the agreement were Mr Taylor and Mr Steer personally, MDS (effectively Mr Donnellan) and Trimount. Broadly, the scheme that the Shareholders Agreement put in place was that Trimount would straight away buy 96 shares in total from Mr Taylor and Mr Steer at the price of 1,041.67 per share, thereby making an initial investment into Pennyfeathers UK of 100,000. Thereafter, Trimount had the right to buy a further 384 shares for the same price so that, if they exercised that right in full, in effect Mr Bowdery and Mr Attwell would own 48 per cent, Mr Steer and Mr Taylor would own 48 per cent together and Mr Donnellan would own 4 per cent. Trimount would buy these shares by meeting the on-going expenses incurred by Pennyfeathers UK as the preparation of the planning application went forward, earning one share for every 1,041.67 it spent, up to a total of 480 shares. The shares Trimount earned would be transferred to it by Mr Taylor and Mr Steer in equal measure. Pennyfeathers UKs profits were to be distributed by way of dividend in proportion to the shareholdings in the company. The Shareholders Agreement also provided that Mr Taylor and Mr Steer would assign the 2005 Option to Pennyfeathers UK. In January 2007 Mr Attwell and Mr Bowdery were both appointed directors of Pennyfeathers UK. Mr Taylor and Mr Steer became directors in April 2007. Mr Donnellan was initially a director and company secretary as from June 2006 but resigned in June 2007. He became a director again in 2009. He, Mr Taylor and Mr Steer are still directors of Pennyfeathers UK. Mr Bowdery and Mr Attwell took the project to Mr Basil Body, a wealthy investor who they thought would be interested in financing the deal. Mr Body was indeed interested and he then became involved in the discussions. He operates through a company called Kilnsea Developments Ltd. The plan envisaged by the Shareholders Agreement was not in fact implemented. The 2005 Farm Option was never assigned to Pennyfeathers UK by Mr Taylor and Mr Steer. Why this did not happen is a matter of dispute between the parties. By the end of 2007 it was decided that Mr Bowdery and Mr Attwell would buy Mr Taylor, Mr Steer and MDS shares in the project and take it forward by themselves. The proposal was that Mr Taylor and Mr Steer would receive a sum of money up front on conclusion of the buy-out agreement and then substantially more money if and when planning permission was obtained and the Farm sold on to developers. Mr Taylor and Mr Steer would pay MDS its share out of the monies paid to them. In return all three would transfer or cancel their shares in Pennyfeathers UK and Mr Taylor and Mr Steer would resign as directors. One of the main issues in this case is whether that proposed buy-out was ever the subject of a binding contract between the parties. The Claimants say that no agreement was ever concluded; that accordingly the terms of the Shareholders Agreement still operated and that the fiduciary duties owed by Mr Bowdery and Mr Attwell to Pennyfeathers UK continued in effect. Mr Bowdery and Mr Attwell say that a binding buy-out agreement was concluded at a meeting on 27 December 2007 held at Gunwharf Quays hotel in Portsmouth (‘the Gunwharf Quays meeting). This, they say, superseded the Shareholders Agreement and entitled Mr Bowdery and Mr Attwell thereafter to pursue the development of the Farm for their own benefit, free of any duty to act in the best interest of Pennyfeathers UK. It is common ground that in anticipation of acquiring complete control of Pennyfeathers UK, (whether or not after a binding buy-out agreement was concluded) Mr Bowdery and Mr Attwell set up Pennyfeathers Jersey in March 2008. It is also common ground that Mr Taylor and Mr Steer agreed that after 27 December 2007, Mr Bowdery and Mr Attwell should meet Mr McDowall and negotiate directly with him for a new agreement for the purchase of the Farm. On 4 April 2008, Pennyfeathers Jersey entered into a contract with Mr McDowall for the conditional purchase of the Farm (the 2008 Purchase). Under the 2008 Purchase, Pennyfeathers Jersey agreed to pay 16 million for the Farm. The sale would be completed within 6 months after the Farm was allocated by the Council, a step that indicates that the land is considered by the Council suitable for development. Importantly for our purposes, under clause 18 of the 2008 Purchase, Mr McDowall promised not to renew, amend or extend the 2005 Option without the consent of Pennyfeathers Jersey. Mr Bowdery also started to approach people who owned smaller parcels of surrounding land which would be incorporated into the development. In the course of 2008 and 2009 Pennyfeathers Jersey entered into a number of option agreements over that land (the Surrounding Land Options). There is a dispute over whether Mr Taylor and Mr Steer knew about and consented to the acquisition of the Surrounding Land Options. There is also a dispute about the nature of the relationship between Pennyfeathers Jersey, Mr Bowdery and Mr Attwell. By the middle of 2009 the relationship between Mr Bowdery and Mr Attwell on the one hand and Mr Taylor, Mr Steer and Mr Donnellan on the other had broken down. Mr Bowdery and Mr Attwell resigned as directors of Pennyfeathers UK on 28 August 2009. Since that time, an application for planning permission has been submitted to the Council by Pennyfeathers Jersey, Mr Bowdery and Mr Attwell are optimistic that the application will ultimately be granted. The proposed development will comprise the construction of about 1000 residential units, commercial space of about 3,000 square metres and the construction of two sports pitches. Mr Hepburn, who is the planning consultant who has been acting and is still acting as adviser to the project, described the development as a once in a lifetime opportunity. The pleaded case and the Defence The Particulars of Claim were lodged on 8 March 2012. They alleged that Mr Bowdery and Mr Attwell owed fiduciary duties as directors to Pennyfeathers UK and also that the five men were joint venturers in the project and owed each other fiduciary duties. It was alleged that Mr Attwell and Mr Bowdery are in breach of those duties by unlawfully diverting the opportunity to enjoy the fruits of the development of the Farm from Pennyfeathers UK to Pennyfeathers Jersey. It is also alleged that Mr Bowdery and Mr Attwell acted in bad faith towards the Claimants because they intended to exclude Mr Taylor and Mr Steer from the project and to avoid paying them for their interest in Pennyfeathers UK. As a result, the Claimants say, the benefit of the 2008 Purchase and the Surrounding Land Options are held by Pennyfeathers Jersey on constructive trust for Pennyfeathers UK and Pennyfeathers Jersey is liable to account to Pennyfeathers UK on the grounds of knowing receipt and dishonest assistance. The original Defence on behalf of all four Defendants was served in May 2012. It alleged that Mr Taylor, Mr Steer, MDS and Trimount were parties to a joint venture arising in January 2007 but that by the end of 2007 they were agreed that Mr Bowdery and Mr Attwell should be free to exploit the development opportunity for their own benefit. The Defence alleged that the parties attempted to agree the terms under which Mr Bowdery and Mr Attwell would buy Mr Taylor, Mr Steer and MDS interests but that that proved unsuccessful despite persistent efforts on the part of Mr Bowdery and Mr Attwell. It was alleged that the negotiating position of Mr Taylor and Mr Steer lacked constancy, that they asked for different amounts of money and blew hot and cold over finalising a deal. In May 2013 the Defendants applied to amend their Defence and add a Counterclaim, following the instruction of new solicitors and counsel in late March 2013. The proposed new pleading contained some major changes in the facts alleged. Most important was that the Amended Defence alleged that there had been a binding buy-out agreement concluded between all the parties at the Gunwharf Quays meeting on 27 December 2007. Thus, all the references in the original Defence to seeking and failing to agree terms for the buy-out were struck through and replaced with assertions that binding terms were agreed at that meeting. The passages in the original Defence which described the negotiations after that meeting were recast as unsuccessful attempts by Mr Taylor and Mr Steer to vary the agreed contract to achieve more favourable terms for themselves. Such a change of position clearly called for some explanation. In support of the application to amend, Mr Bowdery provided a witness statement. He set out at length his recollection of the events leading up to the Gunwharf Quays meeting, the meeting itself and the discussions thereafter. He concluded: 38. The underlying commercial relationship between Trimount, Mr Steer, Mr Taylor and MDS came to an end at the end on 27 December 2007 by reason of the agreement of that date. Mr Attwell and I have no obligation to have regard to the interests of Mr Taylor and Mr Steer thereafter. Mr Attwell and I intended to act in good faith towards Mr Steer and Mr Taylor in seeking to agree further and subsequent terms of settlement with them thereafter. However, in the event, by reason of what I consider to be Messrs Steers and Taylors inconsistency, vacillation and temporising, no variation of the agreement of 27 December 2007 was ever agreed. That we were not able so to agree does not attenuate or otherwise affect the simple enforceability of the 27 December 2007 Agreement. We seek to do, in these proceedings, just that. Mr Bowdery then describes his misgivings about the advice they were receiving from their solicitors at that time, Mundays LLP, and their decision to instruct new solicitors. 44. Without waiving privilege, I have to say that as a result of the advice that we have received from Maitland Hudson & Co LLP and leading counsel, we now consider that the Defence that was prepared on our behalf by Mundays LLP simply does not reflect fully our account of the facts underlying the dispute and, in particular, what the Defendants believed at all times to be an enforceable agreement as I set out above. I consider that I have to be particularly frank on this point but do not think I can go further than this without waiving privilege. 45. It is my earnest belief that Mr Attwell and I, at all times, have considered the agreement to have been made and to be enforceable and also believe that we had made this clear to our former solicitors. This appears not to be reflected in the Defence as presently drafted. I understand this now but did not understand it previously. 47. It has always been my understanding and that, I believe, of Mr Attwell, that an enforceable agreement was entered in to by myself, Mr Attwell, Mr Taylor, and Mr Steer at the conclusion of a meeting that took place on 27 December 2007. For the reasons that I set out above, it was abundantly clear to all parties to the Shareholders Agreement concluded on 27 December 2007 that by reason of the agreement made on 27 December 2007, Mr Attwell and I were free to exploit the development opportunity in respect of the land at and around Prestwood Grange Farm for our own benefit and had no obligation to have regard to the interests of Mr Taylor and Mr Steer thereafter. Mr Attwell also made a witness statement in which he said that he has always regarded the deal that was agreed on 27 December 2007 between himself, Mr Bowdery, Mr Steer and Mr Taylor as binding. The application to amend was opposed by the Claimants at a hearing on 18 July 2013. At that hearing, the Defendants referred to the instructions they said they had given to Mundays and to counsel then advising them (Michael Davie QC). They asserted that those instructions had made clear to their lawyers that they believed that they had reached a concluded agreement but that the lawyers had mistakenly or inappropriately failed to plead the case in accordance with these instructions. Permission to amend was granted by an order dated 23 July 2013. Unsurprisingly, the Claimants immediately sought disclosure of Mundays file on the basis that privilege had been waived. Disclosure was ordered and at the trial before me, Mr Bowdery and Mr Attwell were cross-examined extensively on the correspondence between them and their legal advisers, including the notes of a consultation with Mr Davie in March 2012. I refer to some of those documents later in this judgment. From those documents it is clear that there is no substance whatever in Mr Bowderys and Mr Attwells assertion that they told their lawyers that they believed that a binding contract had been entered into at the Gunwharf Quays meeting and that Mundays and/or Mr Davie had disregarded those instructions. On the contrary, the question of whether an agreement had been concluded at any point during the long negotiations was carefully considered and the advice given was that there had not. There is no evidence of Mr Bowdery or Mr Attwell expressing dissent or unhappiness with that stance, either in faxes or emails coming from them or in Mundays attendance notes of meetings or conversations with them. Mundays were meticulous in recording the instructions they received and in stressing to Mr Bowdery and Mr Attwell that they must check all draft pleadings sent to them and indicate if they disagreed with anything. If, as he claimed, Mr Bowdery had consistently said in discussions with Mundays that he believed that a concluded buy-out contract had been reached, I have no doubt that the case would have been pleaded on that basis or, if Mundays had advised that such a pleading was untenable on the evidence, there would have been a clear record documenting the instructions received and the advice given. The witnesses For the Claimants, the main witness was Mr Taylor. He worked briefly in the construction industry in the 1970s and then started a successful flooring business. He has had some experience in residential property developments although nothing on the scale of the proposed development of the Farm. I found Mr Taylor generally to be an honest and helpful witness although there were a few minor aspects of his evidence that I consider were implausible. In particular I do not accept that he believed that the proposal being discussed at the Gunwharf Quays meeting involved paying him and Mr Steer a total of 7 million that is 3.5 million each rather than shared between them. The main attack on his credibility concerned the documents generated by the discussion he and Mr Steer had with some potential purchasers of the Farm, in particular the Williams Pears Group in Autumn 2007. It was put to him in cross-examination that those documents evidence an intention on his and Mr Steers part effectively to do what they now accuse Mr Attwell and Mr Bowdery of doing, namely going behind the other directors backs and concluding their own deal with William Pears Group rather than acting for the benefit of Pennyfeathers UK. The draft documents that were produced at the time appear to envisage that Mr Taylor and Mr Steer would receive 3 million personally under the deal or that part of the consideration paid by William Pears Group to Mr McDowall for the land would in fact go to Mr Taylor and Mr Steer and that this should be kept confidential. Mr Taylor was adamant that he always intended to tell Mr Bowdery and Attwell about the proposal put forward by William Pears and that they would have been fully informed about the terms of any such deal if discussions had progressed. Indeed, his evidence was that he did tell them about the Williams Pears Groups interest in taking on the project it in early December 2007 and it was that discussion which prompted Mr Bowdery and Mr Attwell to say that they wanted Trimount to buy out Mr Taylor and Mr Steers shares in Pennyfeathers UK instead. There are some aspects of the William Pears Group documents that are troubling and Mr Lawrence QC appearing for the Claimants acknowledged that some of the wording was less than happy. However, it is difficult to see how it could be alleged that Mr Taylor and Mr Steer hoped successfully to enter into a deal with William Pears Group for the transfer of their shares and keep the terms of the agreement including any payment to themselves — secret from Trimount. The Shareholders Agreement provided that if any shareholder wanted to sell his shares, he had to offer them first to the company at the price of 1,041.67 each and then, if the company did not want them, the shares had to be offered to the other shareholders. If the shares were not bought by the other shareholders, then they could be sold to third parties, subject to the approval of the Board. It is unlikely that the William Pears Group would have been content to pay Mr Taylor and Mr Steer substantial sums for their shares without checking whether the terms of any Shareholder Agreement governing Pennyfeathers UK were likely to create problems. Any covert dealings would very rapidly have come to light and would risk defeating the goal of agreeing terms. Further, it appears that the solicitors Messengers, Mr Curry (the land agent working with Mr McDowall) and Mr Hepburn, the planning consultant knew about the discussions with William Pears Group; this supports the Claimants contention that there was nothing surreptitious about their dealings. I am satisfied that therefore that there was nothing underhand in Mr Taylors or Mr Steers dealings with the William Pears Group and that they do not evidence any bad faith on his or Mr Steers part. Mr Steer also gave evidence. He is a plumber by trade and has known Mr Taylor for 40 years. He was candid about his lack of experience in building development and about his limitations so far as writing or understanding complex documents is concerned. He also said that he had been in a poor financial position in 2007 and had been eager to sell out his interest in the project at an early stage, even though he realised that he would get less for that interest than if he would if he were able to wait until the project was further along. As far as his credibility is concerned, he was cross-examined by Mr Levy QC about a witness statement he had provided in proceedings in Southampton County Court in April 2011. In those proceedings, Mr Steer successfully contested a statutory demand made in respect of debts he was said to owe to Mr Bodys company Kilnsea Developments Ltd. Mr Steers evidence at the trial before me was that in October 2006 Mr Bowdery had lent him 10,000 repayable in six months time. Mr Bowdery had done this, Mr Steer said, out of the generosity of his heart because Mr Bowdery saw that he was in trouble. Later, in about November 2008, Mr Body lent him a further 20,000 and Mr Steer used 8,000 of that loan to repay part of the loan from Mr Bowdery. This loan from Mr Body was supposed to be repaid once the first instalment of the monies under the proposed buy-out agreement became payable to Mr Steer. Hence Mr Steer said in his witness statement contesting the demand in 2011, the monies were not due because the first instalment under the buy-out had not been paid. Mr Levy put to Mr Steer that there were two aspects of that 2011 witness statement which were untruthful or inconsistent with the evidence he was giving in these proceedings. The first was that he said that both the 10,000 loan from Mr Bowdery and the 20,000 loan from Mr Body were linked to the need to tide him over until the monies from the buy-out deal were forthcoming. This was untrue because the date of the 10,000 loan was not May 2008 as he said in that witness statement but October 2006 long before the buy-out idea had been discussed. The second aspect of the witness statement that is problematic for Mr Steer was that Mr Steer disputed both debts on the grounds that they were linked to the monies he said were due to him on completion of the deal relating to the development but that Pennyfeathers Jersey had failed to complete on the deal and that failure was the subject of legal proceedings. Mr Levy put to Mr Steer that this statement was inconsistent with Mr Steers current case that there was no concluded buy-out agreement. As to this second point, the wording of the 2011 witness statement is ambiguous as to whether there was a binding contract for the payment of the sums from which the loan was going to be repaid or whether there was simply an expectation that such a deal would be concluded and the loan repaid then. As to the first point, Mr Steer accepted in cross-examination that the witness statement was wrong to elide the two loans together; the date of the first loan was wrong and that loan had not been made with the intention that it be paid off from Mr Steers share in the buy-out deal; it was completely separate from that. However, I note that it appears that the demand for payment that Mr Steer was responding to referred to the two loans having been made in 2008. The letter from Mr Bodys solicitors of 9 February 2011 making a formal demand for repayment of the alleged debt said that they were instructed on behalf of Mr Body in connection with two loans made in 2008, one of 10,000 and the second of 20,000. The demand did not, for some unknown reason, therefore set out the true situation but incorrectly referred to both loans as being made by Mr Body in 2008. In those circumstances, Mr Steer is not entirely at fault in eliding the two together. One might also question how appropriate it was for Mr Body to commence bankruptcy proceedings against Mr Steer shortly after a substantial letter of claim in accordance with the pre-action protocol had been sent on behalf of Mr Steer to those acting for the Defendants in these proceedings. Therefore, although it is, of course, of the utmost importance that those seeking to set aside statutory demands for debt ensure that the evidence they give disputing the debt is entirely accurate, in the particular circumstances of this case I do not consider that the witness statement substantially undermines Mr Steers credibility as a witness in these proceedings. Mr Donnellan gave evidence for the Claimants. I found him to be an honest and straightforward witness and I accept his evidence. He saw his role as being the draftsman of significant documents such as meeting minutes and letters although he is not legally qualified and did not purport to give professional advice. I accept that he assisted Mr Taylor and Mr Steer conscientiously and that the minutes and notes he produced were accurate to the best of his recollection. Mr Andrew Wilson who was a solicitor with GCL Solicitors LLP gave evidence about various matters including the fact that no one during the course of negotiations between 2008 and 2010 had proceeded on the basis that there had been a binding agreement concluded at the Gunwharf Quays meeting. I accept his evidence as truthful. Mr Adrian Bates was also called to give evidence about the genesis of other companies formed by Mr Taylor or Mr Steer bearing the Pennyfeathers name and about his involvement in the discussions with the William Pears Group. For the Defendants, Mr Bowdery was the main witness. I found him to be an unreliable witness and I reject much of his evidence as deliberately untruthful. My assessment is based on a number of matters. For reasons that I will describe later in this judgment, the contention that there was a binding agreement arrived at during the Gunwharf Quays meeting is unsustainable. No one could have thought that the manuscript note made by Mr Attwell was intended to be legally binding. I do not believe that Mr Bowdery ever thought so, either then or now. His evidence, both in support of the application to amend the Defence and at the trial before me, to the effect that he has steadfastly held that belief from 27 December 2007 to the present is therefore manifestly untrue. His attempt to blame his legal advisers for failing to record or adhere to his instructions was shown to be unfounded when Mundays files were disclosed. There were other instances where his evidence at this trial contradicted what he is recorded as having said to Mr Davie QC in conference. When challenged on these, his response was that the solicitor taking the note inexplicably wrote down what was said incorrectly and that he, equally inexplicably, failed later to point this out. Another attempt to explain away his conduct by blaming inaccurate note-taking arises in respect of what was said at a meeting of the parties on 15 January 2009, once relations between the parties had become hostile and suspicious. It was accepted by the Claimants that this meeting had been stormy. One of the items raised by Mr Donnellan at the meeting was the identity of Pennyfeathers Jersey. Mr Donnellan had become aware that Pennyfeathers Jersey was approaching landowners surrounding the Farm to negotiate options to purchase their land. Mr Donnellans note records the following exchange: DD asked RB if he was in anyway associated with the Jersey Company and if so what was that association? He did not understand how this company could be involved unless Rae/Paul involved. DD asked for disclosure RB stated that he categorically did not know who the Jersey Company was? DD asked who the surrounding Option Agreements were assigned to. RB stated that these were now owned by the Jersey Company. DD asked how could that be if RB, PA were not involved, how could they have known and therefore negotiated option agreements? Any Option Agreements should have been negotiated for the benefit of all shareholders and must feature as a part of any deal. RB PA would not have known about these additional Options unless this was disclosed to them. RB stated that GCL on behalf of the Company had submitted one draft Option to a surrounding land owner and were in process of drafting another. Terms had been agreed. Now it seems these options had been transferred to another Company without consultation or disclosure. Why? DD repeated his question to RB, asking how a 3rd party who seemingly RB and PA had no knowledge of could be involved. RB stated that he dealt with someone called Celine, Thats all he knew. He got cheques from her for work he did for the company. He did not know who the Directors or Shareholders of the Company were. Mr Bowdery accepted in cross-examination that if he had denied being involved in Pennyfeathers Jersey that would have been a complete lie. His answer was that Mr Donnellans note was not accurate and he had not said the words attributed to him. He said that the meeting had been a shouting match and that questions had been directed at him but before he had a chance to answer, the question was answered by Mr Donnellan for him. He therefore denied that he had told the others at the meeting that he had no connection with Pennyfeathers Jersey other than having some contact with someone called Celine. However, a few days after the meeting, on 27 January 2009 there was a conversation between Mr Julian Harvey of Mundays and Mr Wilson who was acting for the Claimants. Mr Wilson made an attendance note which reads: AW spoke to Julian @ Mundays Their client not involved with Pennyfeathers Jersey, cant/wont get copies of the option agreements for surrounding land. Pennyfeathers Jersey arent instructing Mundays Deal on the table to do clients need to stop falling out. Mr Bowdery agreed in cross-examination that it was wholly untrue that he and Mr Attwell were not involved with Pennyfeathers Jersey or that they were unable to get copies of the Surrounding Land Options. He accepted that he personally had negotiated some of those options. He was asked whether there was a good explanation of the fact that his solicitor was putting forward a false position to the Claimants solicitor and he was unable to provide one. I have no hesitation in finding that Mr Bowdery denied his connection to Pennyfeathers Jersey at the meeting of 15 January 2009 in order to obfuscate the position regarding the Surrounding Land Options. I accept that the notes that Mr Donnellan drew up of the 15 January 2009 meeting are an accurate record of what was said. They are clearly supported by the attendance note made by Mr Wilson recording a similar denial given by Mr Harvey on behalf of Mr Bowdery. The evidence of what happened at the meeting shows Mr Bowdery being dishonest, evasive and uncooperative, in that and in other respects, when responding to the understandable concerns being raised by Mr Donnellan and Mr Taylor. I have formed the same conclusion about the reliability of Mr Attwell. He played a secondary role in these events but he has thrown in his lot with Mr Bowdery in pretending that he has always believed that the parties were legally bound by an agreement concluded on 27 December 2007. His evidence as to what happened on 15 January 2009 was markedly different from that of Mr Bowdery. He conceded that Mr Bowdery had denied that he was a shareholder or director of Pennyfeathers Jersey. Mr Attwell did not intervene to correct this because it was in a strict technical sense true the directors of the Jersey company are independent and the shareholder is an employee benefit trust of which Mr Bowdery and Mr Attwell were beneficiaries. I find that he must have realised that the picture that Mr Bowdery was presenting at the meeting was, at best, seriously misleading but he did not intervene to correct this. He said for the first time in the witness box that he did send an email to Mr Donnellan after the meeting seeking to correct the notes of the meeting. He did not know why that email had never been found or disclosed in these proceedings. It was clear to me at this stage of Mr Attwells evidence that he was simply making up his answers as the need arose without any regard to the truth. The Defendants also called Mr Iain Curry who was the land agent acting on behalf of Mr McDowall and Mr Glen Hepburn who was the planning consultant on the Isle of Wight. Both men were careful witnesses and I accept their evidence as truthful although it was only tangentially relevant to the issues which I have to decide. They also called Mr Pesco who is connected with Pennyfeathers Jersey. I consider his evidence later. The Defendants final witness was Mr McDowall who gave evidence by video link from the Isle of Wight. Mr McDowall is an elderly gentleman who has formed strong views on these matters and about these people. Those views are influenced by the undoubted fact that during the time that the Farm development project was in the hands of Mr Taylor and Mr Steer, not much progress seemed to be made so far as he was concerned. Once Mr Bowdery and Mr Attwell took over, Mr McDowall received a substantial payment under the 2008 Purchase and a planning application has at last been submitted with the potential for him to receive further large sums. I accept that his evidence was honestly given, in that it reflected his perception of what happened. The issues The issues that I have to decide are as follows. Were Mr Bowdery and Mr Attwells obligations as directors of Pennyfeathers UK terminated or superseded by a buy-out agreement concluded at the Gunwharf Quays meeting on 27 December 2007? Were any such obligations affected by the failure of Mr Taylor and Mr Steer to assign the 2005 Option to Pennyfeathers UK? If Mr Bowdery and Mr Attwell were still subject to fiduciary obligations, then did the conclusion of the 2008 Purchase between Pennyfeathers Jersey and Mr McDowall and/or the conclusion of the Surrounding Land Options place them in a position where their interests conflicted with those of Pennyfeathers UK? If there was a conflict of interest, did Mr Bowdery and Mr Attwell have the consent of Mr Taylor, Mr Steer and MDS to their conduct? Did Mr Bowdery and Mr Attwell act in bad faith towards Pennyfeathers UK, Mr Taylor, Mr Steer and MDS in resolving to exclude them and Pennyfeathers UK from the opportunity without paying them anything? Did Mr Bowdery and Mr Attwell owe fiduciary duties to Mr Taylor, Mr Steer and MDS as well as to Pennyfeathers UK, such duties arising from the joint venture among the parties to the Shareholders Agreement and/or under the equity in Pallant v Morgan [1953] Ch 43? How does the fact that the 2008 Purchase and the Surrounding Land Options were entered into by Pennyfeathers Jersey rather than Mr Bowdery or Mr Attwell personally affect either their liability for breach of fiduciary duty or the relief that the court can order? If Mr Bowdery and Mr Attwells conduct amounts to a breach of fiduciary duty, are the Claimants estopped or otherwise prevented from bringing this action because they stood by and failed to complain while the Defendants expended time and money on making progress with the Farm development? If I find that the Shareholders Agreement is still extant, how are the shares of Pennyfeathers UK to be allocated among Mr Taylor, Mr Steer, MDS and Trimount? If I find that that Pennyfeathers Jersey holds the benefit of the 2008 Purchase and the Surrounding Land Options on trust, should I determine whether that company has a lien for the money that has been spent on progressing the project between 2008 and today? (1) Was a binding agreement concluded at the Gunwharf Quays meeting? It is common ground that before the 27 December 2007 the parties had agreed in principle that Mr Bowdery and Mr Attwell, through Trimount, would buy out Mr Taylor, Mr Steer and MDS interests in Pennyfeathers UK. There had been considerable correspondence and discussion about the deal and the parties met at the Gunwharf Quays to see if they could arrive at an agreement as to what the buy-out would involve. Mr Taylor, Mr Steer, Mr Bowdery and Mr Attwell attended the meeting. Mr Donnellan was not there. Mr Bowdery had, he says, flown in from Spain (where he then lived) specially to attend. The meeting lasted several hours at the end of which Mr Attwell produced a hand-written note which reads as follows. 1) 250K JON/RON/ JON RON PAY DEREK (4%) (WHOLE PROJECT) 2) 1.25M ON BROWNFIELD SITE 800+ UNITS EXCLUDING SOCIAL 3) FULL PLANNING 2M JON/RON PRO RATA DOWNWARDS Only 4) FULL DISCLOSURE 27/12/07 J.S. signature R.T signature R.B signature P.A signature 5) CONSULTANCY RON/JON-? 6) SHARE/DIRECTORSHIPS ETC CANCELLED & RESIGN 7) ST HELENS FEES REMAINS 8) JON/RON & FARMER CONTRACTS CONCURRENT & CONDITIONAL TO EACH OTHER 9) LEGALS? 10) FARMER COMMITMENT FEES 11) 12 MONTH RENTAL AGREEMENT RENEWABLE UP TO 2010 50 PER YR As I have already made clear, I regard the assertion that that the parties had an intention to enter into legal relations and that the note constituted a binding contract as hopeless. In order to establish that there was a binding contract, the Defendants must show both that the parties had the subjective intention of forming a binding contract and that what occurred between them would lead objectively to the conclusion that they intended to create legal relations: see The Hannah Blumenthal [1983] 1 AC 854 (where the House of Lords held that a contract to abandon an arbitration did not arise from the lengthy inaction of both parties in prosecuting the arbitration because the sellers did not actually believe that the inaction of the buyers was an offer to abandon it) and RTS Flexible Systems Ltd v Molkerei Alois Mller GmbH [2010] 1 WLR 753 as to the objective assessment of words and conduct. I reject the suggestion that the parties had the subjective intention to form a binding contract or that a reasonable observer would have thought that they did. There are many pointers to the absence of any intention to create legal relations. First, this was a substantial deal worth a large sum of money. All four men were seasoned businessmen, familiar with business transactions. They had entered into a long and comprehensive Shareholders Agreement, they held and recorded properly constituted board meetings of Pennyfeathers UK. They did not conduct themselves in an informal way in their business dealings. It is incredible that they would intend to be bound by a sketchy manuscript note taken at the meeting. Secondly, Mr Donnellan, whose company MDS held 4 per cent of the shares in Pennyfeathers UK was not present at the meeting. It was not possible to conclude an agreement to buy his shares without his consent. Mr Attwell said that Mr Taylor told them he had authority to act on behalf of Mr Donnellan and to bind MDS to the deal. I reject that evidence as entirely implausible. Mr Taylor pointed out when he was cross-examined on this issue that MDS had other shareholders as well as Mr Donnellan. Mr Taylor denied that he had any authority to bind MDS or Mr Donnellan. Mr Attwell conceded that he had taken no steps either on 27 December or afterwards to ensure that Mr Donnellan and MDS had agreed to be bound. I note also that when it was suggested to Mr Attwell that he had had authority to sign a document on behalf of Mr Bowdery a few weeks later he dismissed the suggestion saying: Mr Bowdery Im sure, like most people, would not agree for me to sign a document on his behalf when he hasnt even had a view of that document or was aware of its contents Neither he nor Mr Bowdery could have thought that Mr Donnellan was bound by whatever was agreed at the meeting. The third reason why I reject the evidence that there was a binding agreement is that the terms of that agreement are very unclear. Moreover, there were many important details that needed to be hammered out between the lawyers at a later stage. For example: Items (2) and (3) of the note contemplated that 1.25 million would be paid to Mr Taylor and Mr Steer once the Farm had been designated as a brownfield site by the Council for 800 or more housing units excluding social housing. On full planning they would be paid a further 2 million or less, pro rata, if consent for fewer than 800 units was granted. Mr Bowdery and Mr Attwell were asked what would happen if the planning application sought and obtained consent for only, say, 600 houses but that they later sought and obtained consent for an additional 200 units. Mr Bowderys evidence was that Mr Taylor and Mr Attwell would be entitled only to 75 per cent of the payment on the first grant of planning permission regardless of the later expansion. Mr Attwell said that once the site got planning permission, Mr Taylor and Mr Steer would receive the whole 3.5 million. This is precisely the kind of lack of clarity that legal advisers would identify and need to put back to their respective clients to find out their intentions before drafting an appropriate contractual clause. The parties did not agree what was meant by FULL DISCLOSURE. Mr Bowdery said that this meant only that Mr Taylor and Mr Steer were bound to hand over all files that they had about the Farm project. Mr Taylor said that this meant that Mr Bowdery and Mr Attwell would keep him and Mr Steer fully informed about the steps they were taking to progress the project. Mr Bowderys evidence on this point was contrary to what he told Michael Davie QC in consultation on 23 March 2012. At that consultation, Mr Davie distributed photocopies of the 27 December note and went through each item. The attendance note of the consultation records that as regards the item full disclosure, Mr Davie asked whether this meant that Mr Bowdery and Mr Attwell would be required to tell Mr Taylor and Mr Steer about the Surrounding Land Options. The attendance note records: PA responded yes. RBO responded if they asked. This answer was clearly inconsistent with the evidence he gave at trial. Mr Attwells evidence initially was that full disclosure meant that Mr Taylor was obliged to tell him about the discussions he had had with surrounding land owners so that Mr Bowdery could take those forward. When it was put to him that that answer was flatly contrary to what he had told Mr Davie QC, he said that the term meant both it was a two way disclosure. The parties also did not agree what item (9) LEGALS? meant. Mr Bowdery and Mr Attwell said at the trial that this meant that they agreed to pay Mr Taylor and Mr Steers legal costs, although they had to accept that they subsequently refused to pay these costs. Mr Taylors evidence was that this referred to the parties joint intention to arrange for a proper contract to be drawn up by the lawyers incorporating these points. At the consultation with Mr Davie QC, Mr Bowdery is recorded as having explained this item as indicating that the parties were in agreement that everything would be put into a formal legal document. In the event, Mr Bowdery and Mr Attwell denied during negotiations in May 2008 that they had agreed to pay Mr Taylor and Mr Steers legal fees. The fourth reason I reject the suggestion that there was a binding contract is that negotiations continued between the parties soon after the Gunwharf Quays meeting and carried on over subsequent months. As one would expect, the parties respective lawyers began drawing up proper contractual documents and exchanging drafts with track changes and advising their clients on the progress of the negotiations. On 23 January 2008 Mundays (acting for Trimount) sent Mr Wilson a 17 page document of legal due diligence information requests in relation to what they called the proposed purchase of part of the issued share capital of Pennyfeathers UK. The Amended Defence and Counterclaim describe these negotiations as an attempt by Mr Taylor and Mr Steer to revise the concluded contract. There is no reference to that in the contemporaneous documents. Most significantly there is a note of a meeting on 16 January 2008 attended by Mr Taylor, Mr Steer and Mr Attwell (but not Mr Bowdery). At the end of that meeting a note headed Heads of Terms and Restructure proposition for Ron Taylor and John Steer subject to contract was drawn up and signed by the three men. It was a list of 11 points, some of which were clearly the same as the points on the 27 December note and some of which showed that the parties were changing their stance on certain issues. For example, the 16 January 2008 Heads of Terms said: RT/JS to receive 3.5 Million Pounds on preferred land to go forward into the Island plan or outline Planning whichever arises first This was different from the two stage payment discussed at the Gunwharf Quays meeting. The Heads of Terms also incorporated the lease to Mr Taylor of the farmhouse that Trimount had bought from Mr McDowall on terms to be agreed and provided more detail about the consultancy arrangement that would be entered into with Mr Taylor. I have no doubt that this was regarded by all the parties as a continuation of the discussions that they had had previously and not as an attempt to vary an existing binding agreement. Mr Bowdery had to accept in cross-examination that after 16 January 2008 meeting, everyone treated the 16 January 2008 Heads of Terms (rather than the Gunwharf Quays meeting note) as the working document which set out what had been agreed in principle as the way forward. He had to agree that this was clearly marked to indicate that it was not intended to be binding. What the status of the supposed contract formed on 27 December 2007 would be once it was superseded by a document clearly marked subject to contract was left in confusion. Finally, I find that the parties could not have intended to create a legally binding agreement at the Gunwharf Quays meeting because it was clear from item 8 of Mr Attwells note that the parties could only conclude the buy-out agreement once matters had been sorted with Mr McDowall. That makes sense as there is no reason why Mr Bowdery and Mr Attwell would want to be committed to pay substantial sums of money to Mr Taylor and Mr Steer unless and until they were sure that they could enter into a satisfactory arrangement with Mr McDowall for the purchase of the Farm. It was recognised on all sides that the 2005 Option was not a satisfactory arrangement and that a more secure deal would need to be struck. That is why, soon after the Gunwharf Quays meeting, Mr Bowdery and Mr Attwell went to see Mr McDowall to start those negotiations. I am sure that the parties intention was that both the buy-out agreement and the new agreement with Mr McDowall would be signed at the same time and that neither would be binding until they were both finalised. That is also supported by Mr Wilsons correspondence with Mundays between January and April 2008, as I describe later. The Defendants rely on various pointers as showing that there was a binding contract arrived at on 27 December 2007. The first is that the document is signed by all four men. I do not accept that this indicates an intention to be bound. The 16 January 2008 Heads of Terms was also signed by those present even though it was marked subject to contract. They signed simply to indicate that they agreed that the note accurately recorded the points discussed at the meeting. Further, I do not accept that Mr Bowdery and Mr Attwell ever intended that they personally would enter into any agreement with Mr Taylor and Mr Steer. They have throughout ensured that their part in the project is kept off shore for tax reasons. They are not personally parties to any of the arrangements which were in fact concluded; not the Shareholders Agreement nor the 2008 Purchase nor any of the Surrounding Land Options. The due diligence information requests sent by Mundays to Mr Wilson referred to the proposed purchase of the shares by [NEWCO]. After the Gunwharf Quays meeting they set up Pennyfeathers Jersey to be the vehicle for the project. No one was expecting them to enter into any binding agreement themselves even though they signed the manuscript note. The Defendants rely on a letter from the bank RBS to Kilnsea Developments Ltd which is Mr Bodys company dated 14 January 2008 providing a business overdraft facility of 4 million. It was put to Mr Taylor that this indicates that Mr Body was preparing to fund the contract concluded on 27 December 2007. Mr Taylor denied being aware of this facility and in the absence of evidence from Mr Body, I cannot assume that there is any link between this particular project and the overdraft facility. The Defendants point to the fact that the handwritten note of the Gunwharf Quays meeting did not contain the words subject to contract or heads of terms even though Mr Taylor, Mr Steer and Mr Donnellan were familiar with those terms and used them on other documents. On this point I accept the evidence of Mr Taylor that it was not suggested that this was going to be a legally binding agreement. I agree that they would have thought that it was so obvious that the note was not intended to be legally binding that there was no need to include those words. I therefore find that there was no contract concluded at the Gunwharf Quays meeting on 27 December 2007. (2) The failure to assign the 2005 Option to Pennyfeathers UK In the Amended Defence and Counterclaim, the Defendants allege that Mr Taylor and Mr Steers failure to assign the 2005 Option to Pennyfeathers UK was a repudiatory breach by them of the Shareholders Agreement. It was not entirely clear how it was said that this affected the issues in the case. The Defence purported to accept that repudiatory breach and hence bring to an end the Shareholders Agreement. The only relief sought in the Counterclaim in this regard was a declaration that the Shareholders Agreement was repudiated by the breaches of Mr Taylor and Mr Steer. The Claimants submitted not only that there had been no breach but also that any breach had been waived long ago and that, in any event, the purported acceptance of the breach could not affect anything that had happened between the parties before that acceptance and could not absolve Mr Bowdery and Mr Attwell of their duties towards Pennyfeathers UK. Fortunately, I do not have to decide any such difficult legal points, as I am sure that there was no repudiatory breach of the Shareholders Agreement by Mr Taylor and Mr Steer. I have already set out clause 16 of the 2005 Option which provided that the option could not be assigned without the consent of Mr McDowall, that consent not to be unreasonably withheld. Mr Taylor and Mr Steer undertook by clause 6.3 of the Shareholders Agreement to assign the 2005 Option to Pennyfeathers UK. Further, clause 17.2 of the Shareholders Agreement provided: 17.2 The existing shareholders [that is Mr Steer and Mr Taylor] hereby warrant to Trimount that: 17.2.1 17.2.2 The option agreement is fully enforceable and assignable to the Company and the land the subject of the option is the land which it is proposed to be developed A draft assignment of the 2005 Option was drawn up and dated 10 January 2006 to be executed as a deed. It provided that Mr Taylor and Mr Steer assigned the 2005 Option to Pennyfeathers UK in return for Pennyfeathers UK covenanting to indemnify Mr Taylor and Mr Steer against any cost involved in obtaining Mr McDowalls consent. The draft assignment said: 6. Until such time as the said consent has been obtained, the Option Holders will do all such things as they are directed to do by the Company as relating to the Option The draft assignment was signed by Mr Taylor and Mr Steer but not by anyone on behalf of Pennyfeathers UK. In the event, Mr McDowall did not consent to the assignment. In his evidence at the trial he explained that he did not want the Option to be assigned to Pennyfeathers UK because he discovered from publically available information that the company secretary was Mr Donnellan whom Mr McDowall had never met and the company did not have any substantial assets. He did not want to replace Mr Taylor and Mr Steer as his counterparties with a new company of which he knew nothing. The contemporaneous documents show that the problem with getting the assignment finalised was mentioned at various meetings of the Board of Pennyfeathers UK. Mr Attwell agreed in his evidence that the task of obtaining Mr McDowalls consent to the assignment was initially given to Messengers, solicitors who were long standing advisers of Mr Bowdery and became the legal advisers to Pennyfeathers UK on matters relating to the Shareholders Agreement. At a meeting in April 2007 attended by everyone other than Mr Bowdery, Mr Attwell reported that there were matters which might be holding up the assignment of the 2005 Option and that in the absence of Mr Bowdery, he would attend to outstanding matters with Chris Messenger. In August 2007 there was an urgent meeting called because Mr Attwell had told Mr Taylor and Mr Steer that he was not prepared to allow Trimount to put any further money into Pennyfeathers UK until the 2005 Option had been assigned to Pennyfeathers UK as agreed. The notes of the meeting made by Mr Donnellan record that Mr Donnellan asked why Mr Messenger had not sorted this out as instructed following the April meeting. Mr Attwell said that Chris Messenger had told him that he had tried unsuccessfully on several occasions to engage with Mr McDowalls solicitors. At that point the meeting note records that Mr Bowdery said that he would take over dealing with the matter and would confront the Farmer personally on the issue as to why the assignment had not been taken up. Mr Donnellan did not believe that confrontation was likely to be productive. He suggested instead that other solicitors, GCL, who were already working for Pennyfeathers UK on other aspects of the project, be asked to take this on. Chris Messenger should be asked to pass his file to GCL so they could deal with Mr McDowall and find out what if any issues were holding things up. The note of the meeting then continues: DD would instruct GCL and determine what material (if any) effect the non-assignment of the option had in respect of the Shareholders Agreement. DD felt, and PA stated that Chris Messenger had confirmed the same, that the intention in the Shareholders Agreement was that RT and JS had assigned their benefit in the Option Agreement to the Company. RT and JS confirmed their commitment to this. Therefore if the Farmer for whatever reason decided not to complete the assignment, then there were alternative agreements that could be sought to confirm and honour RT and JSs commitment to resolving the issue. DD would further instruct GCL Solicitors to present what other legal framework might be available to the Board to mitigate the issue of the assignment. All parties agreed to this course of action. Thereafter GCL Solicitors wrote to Chris Messenger on 5 September 2007 noting that Mr Donnellan had asked them to deal with the assignment of the 2005 Option to Pennyfeathers UK and asking for a copy of the option and for an update on what steps had already been taken regarding the assignment. Mr Messenger wrote back on 5 October explaining what had happened so far. The picture was rather complicated by a proposed deed of variation to add some more land into the area covered by the option. There had also been some correspondence about the provision of personal guarantees by Mr Taylor and Mr Steer as a way of overcoming Mr McDowalls apparent antipathy to contracting with Pennyfeathers UK. Thereafter the trail goes cold. Once discussions about the buy-out by Mr Bowdery and Mr Attwell of Mr Taylor and Mr Steers shares in Pennyfeathers UK began, the 2005 Option became secondary to their plans. In the negotiations over the buy-out, the non-assignment of the option in fact provided a potential mechanism for giving some security to Mr Taylor and Mr Steer for the deferred consideration under any buy-out deal. As I describe elsewhere, this came to nothing. There was a letter from Mundays to Mr Wilson in March 2008 asking for a copy of the deed of assignment for the option. From this it is apparent that the failure to complete the assignment of the 2005 Option was not the result of any lack of will or foot-dragging by Mr Taylor and Mr Steer. The process stalled because of Mr McDowalls objections to Pennyfeathers UK and perhaps because the issue became linked with transfers of additional land which caused complications. Mr Taylor was cross-examined on the basis that it was up to him to organise the giving of a personal guarantee to remove the obstacle to the assignment. His answer, which I accept, was that if someone had presented him with a personal guarantee to sign, he would have signed it. The matter was in the hands of various solicitors who he thought were dealing with it. The various meeting notes show that the parties agreed how the matter would be handled and accepted that some other plan might be needed if Mr McDowalls objections could not be overcome. For reasons that remain slightly obscure, the assignment did not happen and then the issue was overtaken by the buy-out negotiations and the 2008 Purchase. Whether this was, nevertheless, strictly speaking a breach by Mr Taylor and Mr Steer of their obligations under the Shareholders Agreement I do not need to decide as, in the particular circumstances of this case, it was certainly not a repudiatory breach and was never treated as such by Trimount. Further, I accept the Claimants submissions that there has been clear affirmation of the Shareholders Agreement by Mr Bowdery and Mr Attwell since it became apparent in August 2007 that it might not be possible to bring about the assignment (see the notes of the meeting set out in paragraph 53 above). The negotiations for the buy-out deal that took place at the Gunwharf Quays meeting were all based on the assumption that the Shareholders Agreement was still in place and there was no mention at that meeting of termination for alleged breach. I find therefore that the failure to assign the 2005 Option does not affect the fiduciary duties owed by Mr Bowdery and Mr Attwell to Pennyfeathers UK. (3) Conflict of the interests of Mr Bowdery and Mr Attwell with those of Pennyfeathers UK Given my findings in the previous sections, I find that the fiduciary obligations owed by Mr Bowdery and Mr Attwell to Pennyfeathers UK continued until they resigned as directors in August 2009. The original Defence sought to argue that the non-binding agreement in principle concluded at the Gunwharf Quays meeting was enough in effect to release Mr Bowdery and Mr Attwell from those duties and allow them to divert the Farm project to their own benefit. In their closing submissions the Defendants say that even if no contract was concluded on 27 December 2007, it is absolutely clear that at that meeting the parties agreed to go their separate ways. I do not accept that any such agreement could affect the obligations of Mr Bowdery and Mr Attwell towards Pennyfeathers UK. They were still bound by their fiduciary duties unless and until they bought out all the other shares and were in a position to cause the company to release them from those duties. Even though the parties were agreed in principle to the buy-out taking place, that certainly did not mean that Mr Taylor and Mr Steer were agreeing to the Defendants taking over the benefit of the Farm development despite the absence of a concluded buy-out agreement. The strictness of the fiduciary duties owed by a director to his company has consistently been emphasised in the case law. In Re Bhullar Bros Ltd [2003] BCC 711 (CA) a business had been built up by two brothers who were both directors of the company. After the relationship between the brothers families had broken down, it was agreed in principle that the business would be divided up and that it should therefore not acquire any more properties. One of the brothers then acquired a property adjacent to the companys premises for his own benefit. The Court of Appeal held that where a fiduciary had exploited a commercial opportunity for his own benefit, the relevant question was whether the fiduciarys exploitation of the opportunity was such as to attract the application of the rule that a fiduciary should not enter into transactions in which he had a personal interest conflicting or which might possibly conflict with that of the company. As to when a transaction might possibly conflict with the interest of the company, the Court of Appeal cited the speech of Lord Upjohn in Phipps v Boardman [1967] 2 AC 46 (at page 124): In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict Counsel for the Defendants drew my attention to the judgment of the Court of Appeal in Sharma v Sharma [2013] EWCA Civ 1287, a case that was decided after the trial of this action. It was conceded in Sharma that the Petitioners conduct in acquiring dental practices for her own benefit would be a breach of the no conflict rule and the no profit rule since she was a director of a company which owned and operated dental practices. The Court referred to the significance of the House of Lords decision in Boardman v Phipps [1967] 2 AC 46 as being two fold: First, it illustrates the strictness with which the courts will enforce fiduciary duties, even where, in the absence of a breach of duty, the beneficiary would nonetheless have been unable to take advantage of the relevant potential benefit. Secondly, it establishes that the beneficiary’s consent does not absolve the fiduciary from liability, unless he has disclosed all material facts. The first point there that it is no defence to a claim for breach of fiduciary duty that the principal would not have been able to exploit the misappropriated opportunity itself is well established in the case law: see per Jonathan Parker LJ at paragraph 41 of Bhullar. It is obvious to me that the conduct of Mr Bowdery and Mr Attwell after 27 December 2007 was in conflict with the interests of Pennyfeathers UK and a clear breach of their fiduciary duties. The development of the Farm was the very opportunity which Pennyfeathers UK had been incorporated to pursue and that development was the stated purpose of the company according to the Shareholders Agreement. The 2008 Purchase which Mr Bowdery and Mr Attwell caused Pennyfeathers Jersey to conclude with Mr McDowall imposed on Mr McDowall duties which were inimical to the interests of Pennyfeathers UK in that Mr McDowall promised to sell to Pennyfeathers Jersey the land for which Pennyfeathers UK was meant to be pursuing planning permission. (4) Consent to the conflict of interest The Defendants argued that if their conduct after 27 December 2007 was prima facie a breach of their duties, it was prevented from being a breach because they had the consent of the other shareholders of Pennyfeathers UK to that conduct. The question of what amounts to the consent of the shareholders was also discussed in Sharma. Having considered the earlier cases of Re Duomatic Ltd [1969] 2 Ch 365 and Gwembe Valley Development Co Ltd (in receivership) v Koshy (No 3) [2003] EWCA Civ 1048, Jackson LJ (with whom the other members of the Court agreed) summarised the principles as follows: i) A company director is in breach of his fiduciary or statutory duty if he exploits for his personal gain (a) opportunities which come to his attention through his role as director or (b) any other opportunities which he could and should exploit for the benefit of the company. ii) If the shareholders with full knowledge of the relevant facts consent to the director exploiting those opportunities for his own personal gain, then that conduct is not a breach of the fiduciary or statutory duty. iii) If the shareholders with full knowledge of the relevant facts acquiesce in the director’s proposed conduct, then that may constitute consent. However, consent cannot be inferred from silence unless: a) the shareholders know that their consent is required, or b) the circumstances are such that it would be unconscionable for the shareholders to remain silent at the time and object after the event. iv) For the purposes of propositions (ii) and (iii) full knowledge of the relevant facts does not entail an understanding of their legal incidents. In other words the shareholders need not appreciate that the proposed action would be characterised as a breach of fiduciary or statutory duty. Mr Bowdery and Mr Attwell say that Mr Taylor, Mr Steer and Mr Donnellan knew that they were approaching Mr McDowall to organise the purchase of the Farm for their own benefit. They were told that the 2008 Purchase was about to be concluded and they did nothing to stop it. Mr Bowdery and Mr Attwell also say that Mr Taylor knew about the negotiations taking place for Pennyfeathers Jersey to acquire the Surrounding Farm Options. On this basis they assert that the other shareholders of Pennyfeathers UK consented to their actions or at least that they acquiesced in circumstances where it would now be unconscionable for them now to object. It is accepted by the Claimants that after the Gunwharf Quays meeting, they agreed to Mr Bowdery and Mr Attwell making direct contact with Mr McDowall to start discussions for a new arrangement for the benefit of Mr Bowdery and Mr Attwell personally, in the expectation that a buy-out deal would soon be concluded. Beyond that, the Claimants deny that any fully informed consent was given to any of the actions of Mr Bowdery and Mr Attwell. They also say that any consent given to those initial contacts with Mr McDowall was vitiated by the bad faith of Mr Bowdery and Mr Attwell because, unbeknownst to Mr Taylor and Mr Steer, they had formed the intention of pressing forward with the Farm development for their own benefit without in fact entering into any buy-out deal with the other shareholders. I consider first the question of whether there was any informed consent to Pennyfeathers Jersey concluding a contract with Mr McDowall prior to the entering into a concluded buy-out arrangement. It is clear to me that there was not. There is plenty of evidence in the contemporaneous documents that early in 2008 Mr Taylor was alarmed by Mr Bowdery and Mr Attwells conduct in moving ahead with the project for their own benefit even though the deadline of 31 January set for the conclusion of the buy-out deal had come and gone without any final agreement. On 4 February 2008 Mr Taylor wrote to Mr Donnellan complaining that the date for finalising the buy-out was slipping but that it appeared that Mr Bowdery and Mr Attwell were already approaching surrounding land owners and offering them more money for their land than Mr Taylor had previously been offering them on behalf of Pennyfeathers UK. He wanted transparency in all dealings in case the buy-out deal fell through. On the same day Mr Taylor wrote to Mr Hepburn warning him that no buy-out deal had been concluded and telling him: For the avoidance of doubt and interim to any confirmation that the acquisition is to proceed, all matters pertaining to the project are a matter for Pennyfeathers [UK] and normal communication protocols. Therefore any matter pertaining to the project should be addressed to me unless you are otherwise informed by me that this is to change. He ended that letter: My concern as you will appreciate is that if the acquisition does not take place as has been proposed, then we need to maintain our focus and protect the best interests of the project going forward Unfortunately, for his own reasons, Mr Hepburn decided not to comply with Mr Taylors request. That letter from Mr Taylor had arrived shortly after Mr Hepburn had had a meeting with Mr Bowdery on 31 January 2008 at which Mr Bowdery had told him that in future instructions would come from him and Mr Attwell and not from Mr Taylor. Thereafter Mr Hepburn dealt exclusively with Mr Bowdery, Mr Attwell and Pennyfeathers Jersey and did not keep Mr Taylor or Mr Steer informed about the work he was doing for Pennyfeathers Jersey on the Surrounding Land Options. Discussions about the terms of the buy-out took place between Mr Wilson, the solicitor acting for Mr Taylor and Mr Steer and Kevin Healy and Julian Harvey at Mundays. Mr Wilson was assured that the purchase of the Farm and the buy-out deal would be concluded at the same time. To this end Mr Wilson agreed with Mundays that he would draw up a deed of surrender of the 2005 Option and an agreement to surrender that option which would form part of the buy-out deal. On 14 March 2008 Mr Wilson wrote to Mundays: Obviously you will take the property subject to the terms of the Option Agreement in favour of my clients, unless of course the proposed Deed of Assignment is entered into by exchange of contracts for your clients purchase. Please also note that it is considered that your client will be breaching the terms and conditions of the Shareholders Agreement if it proceeds to exchange on its purchase of the farm at this point in time. As stated in previous correspondence I await my clients instructions in respect of drafting documentation but hope to be in a position to revert to you in respect of the same shortly hereafter. The response from Mundays at this stage was far from reassuring. Thank you for your letter of 14th March. It is my clients intention to enter into the purchase agreement on the farm site as soon as possible and in respect of your third paragraph I should be grateful if you could please provide further explanation for the benefit of my client. I have not seen a copy of the Shareholder Agreement and perhaps you could direct me to the provisions which your client alleges will be breached. Finally, you confirm that you hope to be in a position to revert shortly and I should be grateful if you could try to indicate in terms of some form of tangible timescale as to when you will be in a position to respond. With Easter approaching I would wish to advise my client as soon as possible. There was growing urgency about the need to conclude the purchase of the Farm by 5 April 2008, the end of the financial year, because of some change in the capital gains tax rules that would adversely affect Mr McDowall. Mr Wilson responded promptly with the drafts that he had been asked to prepare. He sent these to Mundays on 1 April 2008. The structure being proposed was that (a) the 2005 Option would be extended by Mr McDowall for the benefit of Mr Steer and Mr Taylor for the perpetuity period allowed by law; (b) Mr Taylor and Mr Steer would therefore have the ability to buy the Farm at any time; (c) they would receive 500,000 on conclusion of the buy-out deal; (d) they would then be paid a further 3.5 million once they executed a deed of surrender for the extended 2005 Option. They would execute that deed of surrender in effect when planning permission was achieved. Mr Wilson concluded his letter saying: I hope that the documentation can be agreed and exchanged at the same time as your clients conditional contract with Mr McDowall. In the meantime I look forward to receiving a copy of the draft Agreement between your clients and Ian McDowall. You will appreciate that the terms of the Agreement are particularly pertinent to the terms of my clients Agreement. The next day, 2 April 2008, Mr Healy of Mundays replied to Mr Wilson sending back the draft contracts with his track changes. He said in the covering email: I should be grateful if you could approve these documents and let me have your comments and/or amendments by return. Mr McDowall wants to exchange by Friday of this week and the documents need to go to Jersey for signature. I am instructed by my clients that they are not prepared to disclose the Sale and Purchase Agreement with Mr McDowall to your clients. However, the way the transaction is structured there is no prejudice to your client in my client not disclosing the Agreement. Mr Wilson responded rapidly on 3 April noting the refusal to provide the copy of the draft contract between Mr McDowall and Mundays clients. He asked Mr Healy to provide an undertaking that he would ensure that that contract included an obligation on Mr McDowall, at the Defendants request, to extend the 2005 Option. He wrote again on 4 April enclosing agreed amended versions of the documents. He said at the end of that letter: The Supplemental Agreement [i.e. the extension of the 2005 Option] is to be revised to extend the Option Period yet further, to be equal to the perpetuity period allowable in law. This has been agreed with [Mr McDowall] already. I enclose herewith a revised copy of the Supplemental Agreement. Please confirm that an appropriate clause is within your contract with [Mr McDowall] to oblige the farmer to enter into the Supplemental Agreement at your clients request. I trust that all matters raised herein and in earlier correspondence can be dealt with prior to tomorrows deadline. There was no response to this letter prior to the 2008 Purchase being entered into on 4 April 2008. That contract, as I have already described, far from including the term that Mr Wilson had requested to protect his clients position, precluded Mr McDowall from extending the 2005 Option without Pennyfeathers Jerseys consent. On the basis of that correspondence it is impossible for the Defendants to contend that Pennyfeathers UKs shareholders consented to Mr Bowdery and Mr Attwells conduct so as to prevent that conduct amounting to a breach of their fiduciary duties to the company. On the contrary, the Claimants consistently maintained, through Mr Wilson, that no contract should be concluded with Mr McDowall until the buy-out contract was concluded. They were seriously misled by the assurance that there was nothing in the draft 2008 Purchase that would prejudice their position and were clearly prejudiced by the failure to include a term providing for the extension of the 2005 Option. It is true that they did not take steps to disrupt the negotiations between Mr Bowdery and Mr McDowall. At that stage, as Mr Taylor said in evidence, he still believed that Mr Bowdery and Mr Attwell were going to do the honourable thing and complete a contract with us. So far as the Surrounding Land Options are concerned, the position is even clearer. Mr Attwells evidence was that he mentioned the options to Mr Taylor in various discussions they had during the course of 2008. Mr Taylor denied that he had been told about these options. I accept Mr Taylors evidence on this point. It is apparent from the correspondence that Mr Taylor found out about the approaches to the surrounding land owners from those land owners themselves and not from Mr Attwell. GCL Solicitors wrote to Mundays to that effect on 5 February 2008. That letter said: It has come to my clients attention that a number of adjoining land owners have been approached by your clients without the permission or knowledge of Pennyfeathers Ltd and/or my clients. A number of such adjoining land owners have been in discussion with Pennyfeathers Limited and my clients previously. Please refer your clients to clause 9 of the Shareholders Agreement and the non-competition restrictions contained therein. Any further negotiations must be with the express knowledge and consent of my clients The exchanges at the heated meeting of 15 January 2009 that I have already described are only explicable on the basis that Mr Bowdery and Mr Attwell concealed their work on the Surrounding Land Options. In addition to the passages I have already set out, in which Mr Bowdery misleadingly downplayed his responsibility for the fact that Pennyfeathers Jersey was entering into the Surrounding Land Options, the following exchange is recorded: RT asked why we were not given the opportunity. There was sufficient capital under the Shareholders Agreement in relation to the 500k investment by Trimount to achieve this. In addition this was never discussed so how could RB arrive at this assumption? DD requested that RB PA provide full disclosure on the surrounding option agreement as these were the property of Pennyfeathers [UK] RT seconded this on the basis that these options provided increased value to the company and would need to be reflected in any proposal from Trimount. They should be returned to the Company RB stated that he did not need to disclose these details. DD stated that if necessary a Court Order could be obtained! The note then records that there was a short break when the meeting broke up, no doubt for tempers to cool. This shows, in my judgment, that Mr Bowdery and Mr Attwell withheld information about the acquisition of the Surrounding Land Options from the other shareholders. It cannot be contended therefore that they had the consent of the other shareholders for Pennyfeathers Jersey to obtain these options. The Defendants alternative response was that information about those options was publically available from the Land Registry. That is no basis on which to allege that they obtained the fully informed consent of Pennyfeathers UK to conduct that was clearly in conflict with the interests of the company. Mr Levy also put to Mr Taylor that the Claimants had not taken steps to bring injunction proceedings against Pennyfeathers Jersey when they found out about the Surrounding Land Options. I do not accept, if this is what is suggested, that a principal is to be treated as consenting to or ratifying breaches of fiduciary duty unless it brings injunction proceedings to prevent further breach. I therefore find that Mr Bowdery and Mr Attwells conduct in causing Pennyfeathers Jersey to enter into (a) the 2008 Purchase agreement with Mr McDowall and (b) the Surrounding Farm Options was a serious breach of their fiduciary duties towards Pennyfeathers UK since they had not acquired the informed consent of the other shareholders to that conduct. 5. Did Mr Bowdery and Mr Attwell act in bad faith towards Pennyfeathers UK and the other shareholders? The Claimants allege not only a breach of the no conflict rule but also that Mr Bowdery and Mr Attwell were in breach of their obligation to act in good faith towards Pennyfeathers UK. The Claimants assert that Mr Bowdery and Mr Attwell never intended to conclude a buy-out deal with Mr Taylor, Mr Steer and MDS. Their intention, at least as from shortly before the 2008 Purchase was concluded, was to take the Farm opportunity for themselves and, if possible, avoid paying the others anything. They decided to do this by dragging their heels over the conclusion of the buy-out agreement in the knowledge that the only lever Mr Taylor had to pull was the 2005 Option and that that might well expire before planning permission was granted. In support of their allegation of bad faith, the Claimants rely on some of the events that I have already described: the volte face in the way the Defence was pleaded when the case was amended to allege a concluded agreement at the Gunwharf Quays meeting; the refusal to disclose a draft of the 2008 Purchase before it was signed and the misleading reassurance that nothing in it would prejudice the position of Pennyfeathers UK; Mr Bowdery and Mr Attwells attempt to sow confusion as to the real nature of their connection with Pennyfeathers Jersey and their refusal to disclose details of the Surrounding Farm Options. The Defendants deny that there was any bad faith here. They point to the fact that negotiations between the solicitors continued over the terms of the buy-out agreement long after 4 April 2008; the Claimants were the ones changing their stance on the desired terms and trying always to extract more money for themselves; the Defendants have, at least since the Amended Defence and Counterclaim been able and willing and are now able and willing – to pay Mr Taylor and Mr Steer the substantial sums which they say were due to them under the contract concluded at the Gunwharf Quays meeting. To determine who is to blame for the failure to conclude a buy-out deal, I pick up the narrative after 4 April 2008, the date on which the 2008 Purchase was concluded without making provision for the extension of the 2005 Option. There was no response to Mr Wilsons letters of 3 and 4 April although Mr Bowdery and Mr Hepburn were busy during that month in negotiating the Surrounding Land Options. Mr Wilson wrote to Mr Healy on 29 April saying that his clients were growing slightly anxious at the continuing delay. Mundays replied on 6 May 2008 with a first draft of the deed of surrender. As Mr Wilson pointed out to Mr Healy the following day, Mr Healys draft document was completely different from the drafts they had hitherto been working on. The earlier drafts involved extending the 2005 Option and surrendering it only once planning permission was received and all the deferred consideration of 3.5 million paid. Mr Healys draft involved the immediate surrender of the 2005 Option so that the only security for the future payment of the 3.5 million was a charge over the 2008 Purchase. Mr Wilson asked Mr Healy to explain why this change had been made since it was contrary to the Heads of Terms agreed by both parties. He concludes saying: My client is keen to complete the transaction as soon as possible (by the end of the week if achievable) and I therefore look forward to hearing from you On the evening of 8 May, Mr Wilson wrote to Mundays expressing his disappointment at the lack of response to his email. He asks them to explain the current proposed structure of the buy-out deal and in particular to explain what would trigger payment of the deferred element of consideration (the 3.5 million) and what security was offered for that deferred payment. There is further correspondence back and forth during May with proposals that meetings be held which were not then held; with Mr Wilson complaining generally about the lack of response to his requests for information and insisting that some security be provided for any deferred consideration under the buy-out deal. Deadlines were set for the conclusion of the buy-out agreement but they passed without any concluded agreement. What emerges from the contemporaneous documents was that there was a very considerable amount of activity on the part of Mr Bowdery and his advisers negotiating and concluding the Surrounding Land Options on behalf of Pennyfeathers Jersey and corresponding with the Council but very little energy directed at sorting out the buy-out deal. It seemed that by 9 July 2008 the parties were finally agreed as to the structure of the transaction and Mr Wilson set this out in an email to Mr Healy. This would involve both an extension of the 2005 Option which would then be assigned but subject to a charge and also a charge over the 2008 Purchase. The solicitors began exchanging drafts of the various agreements that would need to be signed. No agreement was in fact signed. There was a meeting between Mr Bowdery, Mr Steer and their respective solicitors at Mundays on 21 August 2008. Mr Healy made clear at the outset that his clients no longer agreed the structure thus far set out in the draft documentation. During the discussion Mr Cooney, a solicitor in the same firm as Mr Wilson protested that there was no effective security being offered to his clients for the deferred consideration since all that was being offered was a charge over the extended option over the Farm. Mr Bowdery is recorded as saying that that was all that was on offer and they must take it or leave it. The meeting concluded with the parties agreeing that the deal would be completed along the lines proposed by Mr Healy on 19 September 2008. At the same time as these discussions were taking place, Mr Bowdery and Mr Attwell had started negotiations with a potential investor, Keith Conner, who might replace Mr Body as the funder of the project. Keith Conner discussed the Pennyfeathers site with Mr Bowdery at a meeting on 12 August 2008 and emailed him the next day to comment on the figures that Mr Bowdery had provided to him. He said: We need clarification on a few issues. 1. The options with both Ron and John would appear to lapse in 2010, and your suggestion is that if the allocation arrives in 2011 or later, then why are we having to allocate monies against them, at 4,200,000 it is certainly a big cost, but we need to fully understand your thinking here. Have they charges against the company or indeed the lands, have they paid monies to date etc etc Mr Bowdery faxed Mr Attwell some figures dated 4 September 2008 outlining the proposal from Mr Conner. It set out the sums of money already paid and said: 4. Ron & John purchase option and comp. for total of 4.2 million – 500,000 now and 3.7 million on full planning. Although as stated before, this agreement does not have to be signed as their options run out in 2010 and are therefore worthless as allocation is in 2011 The figures that Mr Bowdery jotted down on the proposal sent to him by Mr Conner referred to 500,000 payable to Mr Taylor and Mr Steer but not the remaining deferred consideration. The negotiations on the buy-out deal continued on and off during the rest of 2008 and into 2009. There were more meetings between the parties and more heads of terms drawn up and circulated. Mr Taylors evidence was that he and Mr Steer were also having meetings with Mr Conner and Mr Body directly to try to push matters forward. He and Mr Steer met Mr Conner around Christmas time in 2008. Mr Conner told them that he intended to take over the financing of the project from Mr Body. He also told Mr Taylor and Mr Steer first, that Mr Bowdery and Mr Attwell had no intention of paying Mr Taylor and Mr Steer anything for their interest and secondly that Mr Bowdery and Mr Attwell were buying the Surrounding Land Options through Pennyfeathers Jersey. Mr Conner offered to buy them out for 3.25 million, and there is an email to that effect from Mr Connor to them on 15 January 2009. They were not prepared to accept that. My reading of the contemporaneous documents shows that the persistent concern of the Claimants was the lack of security being offered for the deferred consideration. Given the attitude of Mr Bowdery and Mr Attwell, the Claimants could see their interest in the Farm development slipping from their grasp. Their exasperation at the meetings and that of Mr Wilson when chasing Mundays to make progress is clear. A legal report dated 26 November 2008 and prepared by Mr Wilson for his clients advised them in detail about the offer on the table from Mr Bowdery and Mr Attwell. Under the heading Risks Mr Wilson told them: (emphasis in the original) 8 RISKS 8.1 The obligation to pay this consideration of 4.3m is on a Jersey based company. We can not assess the covenant strength of this company. We have no way of carrying out the usual financial strength of the company. Lets demand it and understand the financial covenants in place? DD 2.12.08 Please note, however, the initial payment of 500,000.00 will be paid simultaneously with completion of the documentation and this sum therefore is not at risk. 8.2 You have no security for the deferred element of the consideration. This is a considerable risk particularly given point 8.1 above. 8.3 You are only being granted an option for a legal charge over the Extant Option Agreement if the deferred consideration is not paid. The form of this legal charge should be agreed now and must include step in rights to the Extant Option Agreement. It is questionable whether the option for a legal charge will be binding on any successor in title as it is currently worded. In its current form the security on offer is worthless. As it stands our advice is that there is considerable risk that the deferred consideration will not be paid. It is not secured. You should not proceed on this basis. Having reviewed the correspondence and the evidence before me, I am sure that the blame for the failure to agree reasonable terms for the buy-out of Mr Taylor and Mr Steers interest lies squarely with Mr Bowdery and Mr Attwell. That also accords with commercial sense. Mr Taylor and Mr Steer had nothing to gain by prevarication or delay and everything to lose. Mr Bowdery was aware of that and he made sure that Mr Taylor and Mr Steer knew that they had little or no bargaining power. Mr Levy stressed in his written and oral closing submissions that Mr Bowdery and Mr Attwell were always offering Mr Taylor and Mr Steer a buy-out with substantial consideration. However, as Mr Wilson advised his clients, that deal was unacceptable if it required them to deliver up their entire interest in the project in return for a promise that in the happening of an uncertain event at some point in the future a Jersey company with an opaque ownership and no discernible assets would pay them 3.5 million. I find that, at the latest by the time of Mr Conners involvement, the Defendants had no intention of paying Mr Taylor or Mr Steer anything beyond the initial 500,000. Before that time, I find that, at the least, they were deliberately and in bad faith manoeuvring themselves into a position where they could, if they chose, exclude Pennyfeathers UK and its other shareholders from the project. That is clear from their decision to conclude the 2008 Purchase without making provision for the extension of the 2005 Option. The need to conclude the 2008 Purchase before the end of the financial year does not justify the inclusion of clause 18.1 which had the effect of greatly devaluing the 2005 Option. That 2005 Option effectively represented the stake that Mr Taylor, Mr Steer and Mr Donnellan had in the project, a stake to which they were entitled because they had the initial idea of developing the Farm and devoted time and resources to gaining acceptance of the Isle of Wight to the idea of a major development there. So far as the Surrounding Land Options are concerned, I find that Mr Bowdery began in February 2008, through Mr Hepburn, approaching the owners of the surrounding land and that Mr Attwell must have known this was happening (since it is his case that he discussed this with Mr Taylor). I have set out my findings as to how this was concealed from Mr Taylor, Mr Steer and Mr Donnellan. I have no doubt that Mr Bowdery and Mr Attwell were acting in bad faith in concealing their actions in relation to the Surrounding Land Options and trying to throw Mr Taylor, Mr Steer and Mr Donnellan off the scent when they found out about Pennyfeathers Jersey from other sources. It is also clear that Mr Bowdery and Mr Attwell formed the view that Mr Taylor and Mr Steer lacked the funds to vindicate their rights in court. Among the privileged material disclosed from Mundays files was a memorandum discussing the Defendants earlier decision not to respond substantively to a lengthy letter before action sent by those acting for Mr Taylor and Mr Steer. The memorandum records that the decision was based in part on the understanding that Pennyfeathers UK, Mr Taylor and Mr Steer were without funds to bring the claim they were asserting. My conclusion on this part of the case is therefore that Mr Bowdery and Mr Attwell were in breach of their duty to Pennyfeathers UK to act in good faith. 6. Joint venture and Pallant v Morgan equitable duties In the Particulars of Claim, in addition to the claim based on breach of fiduciary duty there was a claim put in the alternative that a trust has arisen in respect of the rights held under the 2008 Purchase and the Surrounding Land Options under the equity in Pallant v Morgan. As I have found in favour of Pennyfeathers UK on the primary basis I do not need to consider this alternative claim. It was also asserted that the fiduciary duties owed by Mr Bowdery and Mr Attwell arose not only from their directorships of Pennyfeathers UK but also from the fact that all five men were parties to a joint venture directed at the profitable development of the [Farm]. It was asserted that it was necessarily implicit in the existence of the joint venture that each of the men would act in good faith towards each other and in furtherance of the venture. The point was not argued extensively at the trial but it does make a difference to the result of the case in that the fiduciary duties asserted, if they indeed arise, will be owed not just to Pennyfeathers UK but to Mr Taylor, Mr Steer and MDS personally. The Claimants referred me to the decision in Ross River Ltd v Waveley Commercial Ltd & Peter Barnett [2013] EWCA Civ 910 where the Court of Appeal reviewed the case law on when a fiduciary duty is owed by one joint venturer to another and the content of that duty. The principles that I derive from that case are as follows: As a matter of general principle, the court should be slow to introduce uncertainty into commercial transactions by the over-ready use of equitable concepts such as fiduciary obligations. Thus, the court should not use equitable principles to make up for what might be seen as deficiencies (in the events which happened) in the agreed contract (see paragraph 31 of the judgment of Lloyd LJ). Where the relationship is governed by contract, then the terms of the contract are of primary importance and wider duties will not lightly be implied, in particular in commercial contracts negotiated at arms length between parties of comparable bargaining power (see paragraph 56 of the judgment quoting from the judgment of Briggs J in Ross River v Cambridge City Football Club [2007] EWHC 2155 (Ch)). The fact that the alleged fiduciary has his own, personal interest in the exploitation of the development, to which he is entitled to have regard, does not rule out the existence of a fiduciary duty: paragraph 55. The existence of a fiduciary duty in such a case is very fact-sensitive. The factors that Morgan J had relied on in the judgment under appeal in Ross River were that: the agreement was expressed to be a joint venture; the parties were to share in the profits of the development; Ross River had no control over most if not all of the incurring of expenses to be deducted from the revenues earned; Ross River had no nominee director on the board of the joint venture company and no shares in that company; the alleged fiduciary, Mr Barnett, had accepted in evidence that Ross River had reposed a very high degree of trust in him to run the venture for the benefit of all the parties and that this trust gave rise to duties on his part. The Court of Appeal upheld the finding that equitable duties had arisen in that case. Applying those principles to the facts of this case, I do not consider that a fiduciary duty arose in these circumstances. There was no expectation when the Shareholders Agreement was signed that Mr Bowdery and Mr Attwell would be handling the project without the involvement of the other three or that the other three shareholders were reposing a high degree of trust in their handling of the project. At that stage it was expected that they would all be involved and they entered into the deal as equals, each with their part to play in ensuring that the development was taken forward. It is not alleged that the fiduciary duty arose only after the Gunwharf Quays meeting; on the contrary the thrust of the Claimants case is that nothing happened then to change the nature of the relationships between the parties. In the present case the agreement was described as a Shareholders Agreement and not a joint venture. It also contained an entire agreement clause and a no partnership clause. Mr Taylor, Mr Steer and Mr Donnellan accepted that the counterparty would be Trimount rather than Mr Bowdery and Mr Attwell personally and as reasonably experienced business men they must have understood that the effect of that was that Mr Bowdery and Mr Attwell were not bound to them in a personal capacity. This was not a case where Trimount would be incurring expenses on behalf of Pennyfeathers UK with no oversight by the other shareholders. It was accepted that Trimount would have to provide proof of expenditure on behalf of the company in order to claim its additional 384 shares. All these factors whilst none is determinative in itself militate strongly against the existence of additional equitable duties. The Claimants rely on the fact that in cross-examination, Mr Bowdery agreed, when it was put to him, that the men were entering into a joint venture for the development of the Farm. When Mr Lawrence put to him that it was implicit in that joint venture that the parties should act in good faith toward each other? Mr Bowdery replied Yes. I do not consider that Mr Bowderys answer can be treated as indicating his acceptance that, as a matter of law or equity, fiduciary obligations were owed as between him and the other individuals involved in the project. That answer cannot be binding on the court as to the existing of such obligations and there are many factors which point in the other direction. I therefore reject the assertion that Mr Bowdery and Mr Attwell owed equitable duties to Mr Taylor, Mr Steer or MDS arising out of a joint venture. 7. The relationship between Pennyfeathers Jersey, Mr Bowdery and Mr Attwell The counterparty to the 2008 Purchase and the Surrounding Land Options is Pennyfeathers Jersey. What is the relationship between Pennyfeathers Jersey, Mr Bowdery and Mr Attwell and how does it effect the rights and liabilities that arise in this case? The Claimants assert that Pennyfeathers Jersey is simply the creature of Mr Bowdery and Mr Attwell and should be disregarded for the purposes of this case. In the Amended Defence and Counterclaim it was asserted that Pennyfeathers Jersey was incorporated upon instructions received from Trimount acting through Mr Bowdery. The registered shareholders are said to be First Names Jersey Ltd and Legibus (Nominees) Ltd. The pleading then stated: 15. The allegation that at all material times Pennyfeathers Jersey was owned and/or controlled by Messrs Attwell and Bowdery is denied. The shareholders of Pennyfeathers Jersey are set out in the preceding paragraph. The directors of Pennyfeathers Jersey are First Names Corporate Services Limited and Winter Hill Financial Services Limited who are currently represented by Jennifer Le Chevalier, Mark Pesco, Ben Newman and Kevin OConnell. Mr Attwell and Mr Bowdery are not and have never been directors of Pennyfeathers Jersey. The directors of Pennyfeathers Jersey do not act in accordance with the commands/demands of either Mr Attwell or Mr Bowdery, and are not accustomed to doing so. They are independent directors. 16. Messrs Attwells and Bowderys association with Pennyfeathers Jersey is as employees and directors of Trimount by reason of the following facts and matters: Trimount provides and has provided services to Pennyfeathers Jersey in connection with the development of [the Farm] and surrounding land; Trimount is the sponsoring company of an Employee Benefit Trust called the Trimount Settlement. The Trimount Settlement is a beneficial owner of the shares held in Pennyfeathers Jersey by First Names (Jersey) Limited. As employees of Trimount Mr Attwell and Mr Bowdery are eligible to receive the distribution of benefits from the Trimount Settlement at the discretion of the trustees of the Trimount Settlement. The trustee of the Trimount Settlement is First Names (Jersey) Limited. Mr Bowderys evidence was once the idea for the project had arisen, he and Mr Attwell took advice from their accountants that it would be a good idea to make arrangements for the project to be dealt with off shore for tax reasons. They contacted a consultant called Mercury Tax Group who he said have been used to things like these. In cross examination, Mr Bowdery conceded that the whole structure then put in place had cost about 160,000 to set up and that he hoped to recoup this expense from tax advantages. There was then the following exchange: A. It was recommended to us by my accountants, it was a tax efficient way legally to set something up that may benefit you later on when it all happens and we followed that advice and we did it. And we paid the money to set the company up, or the structure in the company. Q. We can look at the details later or tomorrow morning if we need to, but there was never any question of you or Mr Attwell giving up effective control of the way in which the development was carried forward because this tax efficient structure involving a Jersey company had been set up. You would remain the effective controllers of the project with Mr Body standing behind you, isn’t that right? A. I’m not quite following, sorry. I think I do, sorry. I want to answer properly. Q. Mr Bowdery the point arises in this way: in order to achieve the tax advantages that can be achieved by using an offshore company like Pennyfeathers Jersey you have to be able to persuade the Revenue that the company’s operations are offshore and remain offshore and there are people offshore, namely directors, and we will hear from one of them I think, who are party to the company’s decisions. You understand that? A. Yes, I do. Q. But where a tax avoiding I don’t say evading, I say avoiding .. structure of this nature is put in place, in reality control of the decisions on the ground relating to the project in question, here the Pennyfeathers development, remain with the people who are the beneficiaries of the company and those people were yourself and Mr Attwell. That’s the reality, isn’t it? A. I don’t think you can put it quite as simply as that. Q. All right, you tell me why not? A. As I say, it was set up because that’s what we were advised to do. And the directors they run Pennyfeathers and it is quite difficult to work with them, but they do the day-to-day running. The monies go in there and the decisions and signatures and options et cetera that were then entered into over the proceeding years were by the Jersey company. Although yes, the structure is set up, which I think is in the book, we don’t control it from a day-to-day basis like that at all. It is not done like that and it has to be done like that to keep an arm’s length to make it tax efficient. I’m not sure if the word evading or whatever Q. I used the word avoiding to be polite to you. But the shares in Pennyfeathers Jersey were owned by a trust, is that right? A. That’s right. They were owned by a trust that’s I think an EBT that then is it is an EBT of the Trimount Residential Isle of Wight Limited. Q. And the employees of Trimount, which ever Trimount company it is A. Isle of Wight Limited. Q. who benefit from that trust are yourself and Mr Attwell? A. Yes, the benefit is obviously like that, correct, yes. Q. The ultimate benefit, if any, to be extracted from the operations of the Jersey company will vest in yourself and Mr Attwell? A. Yes, that’s correct. Benjamin Newman and Mark Pesco, two directors of First Names (Jersey) Ltd, provided a joint witness statement on that companys behalf. First Names Corporate Services Ltd is a wholly owned subsidiary of First Names (Jersey) Ltd and is one of the two corporate directors of Pennyfeathers Jersey. They say that Pennyfeathers Jersey: is an independent legal entity formed under the laws of the Bailiwick of Jersey. Its directors exercise their own independent discretion and judgment. They then describe the agreement between Pennyfeathers Jersey and Trimount under which Pennyfeathers Jersey will listen to and take on board advice it receives from Trimount usually through Mr Bowdery. They then say, as regards the allegation that Pennyfeathers Jersey was liable for knowing receipt or dishonest assistance in the acquisition of the property alleged to be held of constructive trust that: I hereby state that neither [Pennyfeathers Jersey] nor any of its directors had cause to suspect that it was receiving trust property as alleged or at all In acquiring the interests, [Pennyfeathers Jersey] paid full and proper consideration for the acquisition of those interests and was a bona fide purchaser for value without notice. The witness statement goes on to describe the various Board meetings at which the directors of Pennyfeathers Jersey resolved to enter into the 2008 Purchase, the agreement with Trimount for the provision by Trimount of services in relation to the management of the development site on the Isle or Wight, the various Surrounding Land Options and later extensions of them between September 2008 and June 2013 and the contracts with various professional consultancies providing advice relating to the development. Mr Pesco, who is a chartered accountant, was cross-examined briefly by Mr Lawrence on behalf of the Claimants. He accepted that: the purpose of Pennyfeathers Jersey over the past five years has been largely or wholly to acquire land or options relating to the development of the Farm; the people for whose benefit Pennyfeathers Jersey was set up are the beneficiaries of the Trimount Settlement, that is Mr Bowdery, Mr Attwell and their families; over the years, Mr Bowdery had communicated with him or with other people in Jersey his wishes as to what should happen on the Isle of Wight as regards taking out options or other matters relating to the development; he could not recall any occasion on which the directors of the company had told Mr Bowdery that they were not prepared to proceed in the way that he wished them to proceed. In their closing submissions on this point, the Claimants posed the following question: Suppose a malfeasant director arranges for assets properly belonging to his company to be appropriated by a different company which is his creature (i.e. it is owned and controlled by him). Can the director then rely upon the principle of corporate personality to say that: whilst he committed the breach he does not have the assets; and the creature company, whilst it has the assets, has committed no breach; and consequently the claimant company cannot recover its assets? They submit that the answer to that question must be no. The Claimants referred me to the decision of Rimer J in Gencor v Dalby [2000] 2 BCLC 734. There the claimant company brought a claim against a former director Mr Dalby alleging that he had diverted various business opportunities to his own off shore company, Burnstead, in breach of his fiduciary duties. It was argued that the off shore company could not be accountable to the claimant because it was not in a fiduciary relationship with it. Rimer J rejected that submission in the following terms: [26] I do not accept that argument which, if correct, would provide the easiest possible escape from the rigours of equity’s strict principle of accountability. All that would be required would be for the profiting director to ensure that he diverts the profit into his own creature company. The facts of this case are that Burnstead was an offshore company which was wholly owned and controlled by Mr Dalby and in which nobody else had any beneficial interest. Everything it did was done on his directions and on his directions alone. It had no sales force, technical team or other employees capable of carrying on any business. Its only function was to make and receive payments. It was in substance little other than Mr Dalby’s offshore bank account held in a nominee name. Burnstead is simply a creature company used for receiving profits for which equity holds Mr Dalby to be accountable to ACP. Its knowledge was in all respects the same as his knowledge. The introduction into the story of such a creature company is, in my view, insufficient to prevent equity’s eye from identifying it with Mr Dalby: I hold that Mr Dalby and Burnstead are both accountable for the profit represented by this commission and I will make an order against them accordingly. The Gencor case was considered by the Supreme Court in the recent case of Prest v Petrodel Resources Ltd [2013] UKSC 34. That case concerned whether the court could order companies controlled by a husband to transfer their properties to the wife as part of her matrimonial settlement on the grounds that that property of the companies should be treated as the property of the husband. Lord Sumption JSC noted that the judge at first instance had found that the management of the company had always been in the hands of the husband, ostensibly as chief executive under a contract of employment, conferring on him complete discretion in the management of its business. The judge had also found that none of the companies had ever had any independent directors: see paragraph 12 of Lord Sumptions judgment. The ownership of the companies was opaque, but the judge had found that the husband had treated the companies cash balances and property as his own and drew on them in addition to his salary as he saw fit. Citing earlier case law which referred to situations where the company was a faade or a sham, Lord Sumption said (at paragraph 28): References to a “facade” or “sham” beg too many questions to provide a satisfactory answer. It seems to me that two distinct principles lie behind these protean terms, and that much confusion has been caused by failing to distinguish between them. They can conveniently be called the concealment principle and the evasion principle. The concealment principle is legally banal and does not involve piercing the corporate veil at all. It is that the interposition of a company or perhaps several companies so as to conceal the identity of the real actors will not deter the courts from identifying them, assuming that their identity is legally relevant. In these cases the court is not disregarding the “facade”, but only looking behind it to discover the facts which the corporate structure is concealing. The evasion principle is different. It is that the court may disregard the corporate veil if there is a legal right against the person in control of it which exists independently of the company’s involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement. Many cases will fall into both categories, but in some circumstances the difference between them may be critical. Lord Sumption held that the judge at first instance had been right to say that there was no basis for finding the kind of impropriety which would justify piercing the corporate veil. Although the husband had acted improperly in many ways, the court could not disregard the legal personality of the companies with the same insouciance as the husband did. The properties to which the wife laid claim had been vested in the companies long before the marriage broke up: Whatever the husbands reason for organising things in that way, there is no evidence that he was seeking to avoid any obligation which is relevant in these proceedings. The first instance judge had found that the husbands purpose was wealth protection and the avoidance of tax but that did not justify the piercing of the corporate veil. However, the Supreme Court went on to conclude that it was possible for the court to order the transfer of the properties over to the wife on the straight-forward basis that, although they were legally held by the companies, they were held beneficially on behalf of the husband by virtue of the particular circumstances in which the properties came to be vested in the companies: see paragraph 43 of Lord Sumptions judgment. Lord Sumption examined how each particular house came to be purchased, noting in conclusion that: Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue. It is not possible to give general guidance going beyond the ordinary principles and presumptions of equity, especially those relating to gifts and resulting trusts. Transposing the concealment and evasion principles to the present case they raise two separate questions: Does the concealment principle mean that I can attribute the actions of Pennyfeathers Jersey in entering into the 2008 Purchase and obtaining the Surrounding Land Options to Mr Bowdery and Mr Attwell so that when it is alleged that the two men broke their fiduciary duties by doing those things, they cannot answer It was not us, it was Pennyfeathers Jersey? Does the evasion principle mean that in considering what relief can be granted as a result of the breach of fiduciary duty, I may decide that Pennyfeathers Jersey holds property on constructive trust just as much as Mr Bowdery and Mr Attwell would if they had entered into the contracts personally? As regards the first of those questions, I accept that the way Pennyfeathers Jersey is run is different from the way Burnstead was run as described by Rimer J in Gencor and the way Prestodel Resources Ltd was run by the husband in Prest. Given Mr Pescos careful evidence, it would not be right to describe Pennyfeathers Jersey as merely being Mr Bowdery and Mr Attwells offshore bank account held in a nominee name. Attention is paid by Mr Pesco and his colleagues to ensuring that there is material to evidence some consideration by Pennyfeathers Jerseys directors of every proposal brought to them by Mr Bowdery through Trimount so that the effort of setting up these companies, trusts and service agreements is not in vain. I am prepared to assume for present purposes that Pennyfeathers Jersey is sufficiently independent of Mr Bowdery and Mr Attwell to achieve the tax advantages that are sought. Does this mean that the structure is also effective in distancing Mr Bowdery and Mr Attwell from the companys actions for the purpose of escaping their fiduciary duties? In my judgment it does not. There is no need to pierce the corporate veil here. It was a breach of Mr Bowdery and Mr Attwells fiduciary duties to divert the opportunity to Pennyfeathers Jersey regardless of the links between them and that company. They were supposed to be pursuing those opportunities for the benefit of Pennyfeathers UK not for any other company. Their links with Pennyfeathers Jersey explain why they diverted the opportunities to that company but they are not necessary to establish that their behaviour was a breach of their duties to Pennyfeathers UK. I am satisfied that the concealment principle means that Mr Bowdery and Mr Attwell cannot interpose Pennyfeathers Jersey to disguise the nature of their own conduct in diverting the opportunities that they should have pursued on behalf of Pennyfeathers UK to their own benefit instead. Even on their own evidence, they were sufficiently involved in bringing the opportunities to Pennyfeathers Jersey and encouraging that company to enter into the contracts for that to amount to a breach of their duties to Pennyfeathers UK. As regards the evasion principle, fortunately the position here is not as opaque as it was in Prest. It is accepted by Mr Pesco and Mr Bowdery that the Trimount Settlement is a beneficial owner of the shares held in Pennyfeathers Jersey by First Names (Jersey) Ltd and that the beneficiaries of the Trimount Settlement are Mr Bowdery and Mr Attwell and their families only. Whatever may be the effect of that for tax purposes, I find that it means that the benefit of the contracts entered into by Pennyfeathers Jersey in relation to the Farm development are impressed with the same trust as they would be if they had been entered into by Mr Bowdery and Mr Attwell personally. The interposition of Pennyfeathers Jersey and the Trimount Settlement should not be allowed to defeat Pennyfeathers UKs rights against Mr Bowdery and Mr Attwell or to frustrate the enforcement of those rights. My reading of Prest indicates that there was no need to establish in this case that Mr Bowdery and Mr Attwell were in control of Pennyfeathers Jersey. The references in Prest to the husband controlling the companies was part of the factual matrix relied to support the conclusion that the company held its assets on trust for the husband sufficiently to entitle the court to regard those assets as available for distribution to the wife. Here, where there is an express trust set up in the Trimount Settlement, there can be no question but that Pennyfeathers Jersey holds its assets, including its interest in the contracts, on trust ultimately for Mr Bowdery and Mr Attwell. Further, there was no discussion in Prest as to whether the directors of the company had dishonestly or knowingly assisted in any wrongdoing. It was enough to find that the companies held the beneficial interests on behalf of the husband. I therefore make no findings as to the state of knowledge of the directors of Pennyfeathers Jersey or as to whether the knowledge of Mr Bowdery and Mr Attwell ought to be attributed to them. 8. Are the Claimants prevented from complaining about the breach of fiduciary duty by laches or acquiescence? The Defendants submit that even if there has been a breach of fiduciary duty on the part of Mr Bowdery and Mr Attwell, the Claimants should not be allowed to complain. Over the past five and a half years, Pennyfeathers Jersey has invested about 6 million in the development of the Farm. In their closing submissions, the Defendants say: it is noticeable that at the time that most of the investment was going on, Taylor and Steer sat back, did nothing and contributed nothing. It was only when the Defendants risking their own capital had moved the project forward to advanced stages and most of the work necessary to bring the project to planning had been done did the Claimants demand the project be put back into their control. I do not accept that description of what has happened here. The Defendants provided a schedule of that expenditure. It appears that the money has been spent on (a) professional fees to Mundays, Mr Hepburn and the design consultants Farrell Design; (b) payments to Trimount, that is in effect to Mr Bowdery and Mr Attwell, (amounting as I see it to about 900,000); and (c) payments to Mr McDowall and the holders of the Surrounding Land Options. There are many entries in the schedule that are too brief for me to understand to what they relate. In so far as the monies spent by Pennyfeathers Jersey relates to the payments for the Surrounding Land Options, I have already set out the facts which show that during the course of 2009 the Claimants objected strongly and consistently to Pennyfeathers Jersey acquiring these options. They insisted that these opportunities should be pursued for the benefit of Pennyfeathers UK. I have also described Mr Bowdery and Mr Attwells attempts to distance themselves from what Pennyfeathers Jersey was doing. In December 2009, by which time the relationship between the parties had finally broken down, Mr Taylor and Mr Steer instructed solicitors to write to some of the owners of the surrounding land notifying them of a potential dispute between Pennyfeathers UK and Pennyfeathers Jersey and telling them that it was contended that Pennyfeathers Jersey held the benefit of the option on constructive trust for Pennyfeathers UK. They subsequently made applications to the Land Registry to be noted as beneficiaries on the titles of the Farm and of the land which was the subject of the Surrounding Land Options. In the light of that, I reject the suggestion that the Claimants have stood by and done nothing whilst 6 million has been invested by the Defendants unaware that the Claimants asserted rights to the project. Mr Levy took me to two cases on acquiescence. Clegg v Edmondson (1855) 44 ER 593 concerned partners in a mining partnership who after dissolution of the partnership obtained a new lease of the mine which they then exploited for their exclusive benefit. The other partners objected and asserted their right to participate in the profits but took no steps to enforce those rights for nine years. It was held that they were precluded by laches from obtaining any relief. Lord Justice Turner referred to the fact that in relation to property like mines, the profits are very uncertain and achievable only after extensive and risky outlay. He held that the claimants could not in justice enjoy the profits when they could not have been made subject to the losses had all the investment in the mine proved unproductive. In the case of In Re Jarvis [1958] 1 WLR 815, two sisters had been left a tobacconist shop by their deceased father. One sister invested in the shop, repairing it after it was devastated by wartime bomb damage and running it as a successful business. The other sister who had not contributed to the business sought an account of the profits. Upjohn J held that the defendant held the business on constructive trust for herself and her sister but that the plaintiff was barred by laches from relief because although she had been fully aware of her rights she took no steps to assert them over the six years prior to the issue of the writ. The facts of those cases are entirely different from the facts of the present case. Even assuming, which I do not decide, that the Farm should be regarded as property akin to the mine in Clegg or the shop in Jarvis, there was no standing by by the Claimants. Mr Bowdery and Mr Attwell could not have believed that they were entitled to take advantage of the rights that Pennyfeathers Jersey acquired over the Farm and the surrounding land for their exclusive benefit. The Claimants were vigorously attempting to secure their stake in the project, asserting their rights and taking what steps they could to vindicate those rights. I reject the submission that laches or acquiescence is established in this case. 9. How should the shares in Pennyfeathers UK be allocated? As I described at the outset of this judgment, the initial allocation of shares in Pennyfeathers UK in the Shareholders Agreement was 96 shares to Trimount, 432 to Mr Taylor, 432 to Mr Steer and 40 to MDS (Mr Donnellans company). Trimount had the option of earning a further 384 shares by paying the expenses incurred during the development phase of the project. The Claimants accept that Trimount did settle some invoices and that it is entitled therefore to some more shares in Pennyfeathers UK. For reasons which were not quite clear at the trial, the formal transfer of those shares over to Trimount was never implemented. The Claimants proposed that this aspect of the case be left over to be considered by the parties, and then if necessary brought back to court in due course. I agree that that is the sensible course. I would expect, if the matter did come back to court, to see some independent evidence or audit of the expenditure by Trimount which supports a transfer over of shares. 10. Is Pennyfeathers Jersey entitled to a trustees lien? The Defendants assert that they are entitled to a trustees lien in the event that I find that Pennyfeathers Jersey holds the benefit of the relevant contracts on trust for Pennyfeathers UK. The Claimants proposed that this aspect of the case be dealt with after handing down this judgment, particularly in the light of the dispute over whether bad faith was established. I have held that Mr Bowdery and Mr Attwell did act in bad faith. I have also commented on the schedule of expenses that has been presented as having been incurred by Pennyfeathers Jersey. I am very far from being in a position to decide which, if any, of those expenses should properly be treated as liable to reimbursement. I will therefore leave this part of the case for another occasion if it can not be resolved by agreement among the parties. Conclusion and relief In summary my conclusions are: There was no concluded agreement arrived at on 27 December 2007 for the purchase by Trimount of Mr Taylor, Mr Steer and MDS shares in Pennyfeathers UK. The failure to bring about the assignment of the 2005 Option did not constitute a repudiatory breach of the Shareholders Agreement by Mr Taylor and Mr Steer. Mr Bowdery and Mr Attwells conduct in causing Pennyfeathers Jersey to enter into the 2008 Purchase and the Surrounding Land Options was a breach of their fiduciary duty as directors of Pennyfeathers UK because it created a conflict between their own interests and the interests of Pennyfeathers UK. There was no informed consent given by Mr Taylor, Mr Steer and MDS to the breaches of fiduciary duty by Mr Bowdery and Mr Attwell. Mr Bowdery and Mr Attwell also acted in bad faith towards the Claimants by pushing ahead with plans for the development of the Farm and by concluding the 2008 Purchase and the Surrounding Land Options without concluding an agreement for the buy-out of the other shareholders interests in Pennyfeathers UK. They also acted in bad faith towards the Claimants in concealing their activities from Mr Taylor, Mr Steer and Mr Donnellan by presenting a very misleading picture of their connection with Pennyfeathers Jersey. There are no additional fiduciary duties owed by Mr Bowdery and Mr Attwell to Mr Taylor or Mr Steer arising from a joint venture or under the equity in Pallant v Morgan. The interposition of Pennyfeathers Jersey does not operate to prevent the conclusion of the 2008 Purchase and the Surrounding Land Options being a breach by Mr Bowdery and Mr Attwell of their fiduciary duties and the assets held by that company are impressed with the same trust as they would have been if Mr Bowdery and Mr Attwell held them personally. The Claimants are not prevented from pursuing this claim by laches or acquiescence. Issues relating to the proper allocation of the shares of Pennyfeathers UK among the shareholders and the existence and the value of any trustees lien for Pennyfeathers Jersey cannot be determined in this judgment. The relief sought in the Particulars of Claim was a declaration as to the trusts on which the 2008 Purchase and the Surrounding Land Options are held, equitable compensation (in the event that the value of those contracts has been diminished by the Defendants actions) and all necessary accounts and enquiries. I note that in Sharma (at paragraph 38) the Court commented that the area of the law relating to the appropriate remedies for a breach of fiduciary statutory duty is now in flux, in particular because of the pending appeal to the Supreme Court from the decision in FHR European Ventures LLP v Mankarious [2013] EWCA Civ 17. That case concerned the receipt of a secret commission and the question whether the remedy of the company against the recipient of the unlawful commission was a personal one only or a proprietary one. The Court considered a distinction drawn by Lord Neuberger MR in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347 between (i) a fiduciary enriching himself by depriving a claimant of an asset and (ii) a fiduciary enriching himself by doing a wrong to the claimant. Lord Neuberger made clear that the first category included the situation where the fiduciary acquired the asset or money by taking advantage of an opportunity or right which was properly that of the beneficiary: see paragraph 66 of Mankarious. My present view is that the controversy described in Mankarious does not cast doubt on the settled principles which apply where the agent acquires for himself property which he was instructed by the principal to acquire or which the principal would have been interested in acquiring. In those cases, Lewison LJ regarded it as clear both that the agent holds the acquired property on (true) constructive trust for the principal, and also that the principal can acquire a proprietary interest in an asset acquired by his agent, even though the principal had no pre-existing proprietary interest in the asset, and the asset was, in the first instance, acquired by the agent with his own money. At the end of his judgment in Mankarious the Chancellor said the case had thrown into clear relief the considerable difficulties inherent in trying to draw distinctions between the different kinds of cases. There was a need for the Supreme Court to consider, amongst other matters, the true jurisprudential nature of the constructive trust in this area of the law: see paragraph 116 of his judgment. In the instant case, the facts fit squarely within the kind of situation where the Court of Appeal in Mankarious regarded the availability of a proprietary remedy as settled. This is true in relation both to the 2008 Purchase and the Surrounding Land Options. Pennyfeathers UK was aware of and was pursuing the opportunity to acquire the farm and the surrounding land before Pennyfeathers Jersey stepped in and concluded the contracts. However, the issues as to appropriate relief were not canvassed in any detail at the hearing and so I will not make any declarations as to trust at this stage.