American Leisure Group Ltd v Walker & Anor [2016] EWCA Civ 445

Case No A3/2015/3381

[2016] EWCA Civ 445

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE CHANCERY DIVISION

Mr David Halpern QC

(Sitting as a Deputy High Court Judge)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 10/05/2016

Before

LORD JUSTICE TOMLINSON

MR JUSTICE MORGAN

Between

American Leisure Group LimitedRespondent

(1) Rupert Roderick Faure WalkerAppellants

(2) David Champion MaceAppellant

Stephen Auld QC and Abra Bompas (instructed by Enyo Law LLP) for Appellants

Paul Sinclair (instructed by Reed Smith LLP) for Respondent

Hearing Hearing date: 14 April 2016

Judgment

Mr Justice Morgan :

Introduction

[1]This is an appeal and a cross-appeal from parts of an order dated 28 September 2015 made by Mr David Halpern QC, sitting as a Deputy Judge of the High Court. The order was made to give effect to the judgment which he had handed down on 31 July 2015.

[2]The Appellants are Mr Faure Walker and Mr Mace. They are the remaining Defendants in an action brought by the Respondent, American Leisure Group Ltd (“ALG”). The action has been struck out as against other Defendants who were originally sued along with the Appellants. The grounds on which the claims were struck out against the other Defendants are not material to the issues considered on this appeal and cross-appeal.

[3]The relevant parts of the order of 28 September 2015 were made on an application by the Appellants to strike out the entirety of the claim brought by ALG against them. That application was made on a number of grounds and, subject to a limited exception which is explained below, the Deputy Judge declined to strike out the claim against the Appellants on any of those grounds. The Appellants initially sought permission to appeal to the Court of Appeal on a number of grounds. On 18 January 2016, Lewison LJ refused permission to appeal on all save one ground which is the only ground now pursued on the appeal. This ground of appeal involves the contention, which the Deputy Judge rejected (subject to a limited exception) that the causes of action asserted by ALG against the Appellants had all been assigned by ALG to a third party prior to the commencement of this action and, accordingly, it was said, ALG did not have title to sue on those causes of action. In response, ALG contended that it had not assigned any of the causes of action on which it relied.

[4]It was accepted before the Deputy Judge that he should ask himself whether ALG had a realistic prospect of succeeding at trial in establishing its title to sue. If it had no realistic prospect of succeeding on that point, then the action should be struck out. Conversely, if ALG did have a realistic prospect of succeeding on that point, then the action should go to trial although it would remain open to the Appellants to argue at trial that the causes of action had indeed been assigned to a third party before commencement of these proceedings.

[5]Although the Deputy Judge held that ALG had a realistic prospect of succeeding at trial in its contention that it had not assigned the causes of action on which it relied, he held, by way of an exception to his general ruling, that there was one matter pleaded where it was clear that the cause of action relied upon had been assigned and he ordered that the relevant plea should be struck out. Subject to that exception, the Deputy Judge dismissed the Appellants’ application to strike out the claim against them. On the appeal, the Appellants contend that the Deputy Judge was wrong to dismiss their application to strike out the entirety of the action.

[6]On the cross-appeal, ALG contends that the Deputy Judge was wrong to strike out the claim in relation to one pleaded matter. On 21 March 2016, Lewison LJ granted ALG permission to cross-appeal on this point.

[7]Both the appeal and the cross-appeal require the court to consider the meaning and effect of an assignment dated 1 June 2013 between ALG as assignor and ALG Recovery Trust Ltd as assignee. In this court, the Appellants and ALG have put forward much the same arguments as they put to the Deputy Judge in relation to the interpretation of the assignment. However, in relation to the cross-appeal, the Appellants contend that there is a further reason why the particular pleaded allegation should be struck out and, in this respect, they rely upon a further finding by the Deputy Judge that he would have struck out that plea even if, contrary to his actual conclusion, he had held that ALG had a realistic prospect of successfully arguing at trial that that cause of action had not been assigned.

Some background matters

[8]Certain matters of fact appear to be accepted for the purposes of the Appellants’ application to strike out the claim. ALG is a BVI company which was formed in May 2007. The shares in ALG were offered to the public on 13 August 2007 when they were the subject of an Initial Public Offering (“IPO”) on the Alternative Investment Market (“AIM”) on the London Stock Exchange.

[9]In addition to these facts which are not in dispute, there are many other facts pleaded not only in the present proceedings but in other proceedings to which I will later refer. These pleadings do not make it wholly clear whether ALG had any significant assets prior to the IPO. We were told by Mr Auld QC (leading Ms Bompas), counsel for the Appellants, that in addition to the capital raised by ALG pursuant to the IPO, ALG acquired other assets pursuant to arrangements made prior to the IPO, where completion of the arrangements was conditional upon the IPO. Apart from the benefit of these conditional arrangements, my understanding is that ALG did not have any significant assets prior to the IPO. The conditional arrangements made by ALG prior to the IPO included an arrangement in respect of an intended leisure development at Tierra del Sol, Florida, USA.

[10]It has also been pleaded in the various proceedings to which I will refer that Mr Faure Walker was a non-executive director of ALG from 22 June 2007 to 31 December 2007 and was the executive chairman of ALG from 1 January 2008 to 28 January 2009. Mr Mace was a non-executive director of ALG from 22 June 2007 until 28 January 2009.

[11]ALG’s pleadings in this action refer to “the Florida Action”. This was an action brought in Florida by Polo Settlement Trust and Solleric Settlement Trust on 28 January 2011. The Florida Action was then carried on, after 29 April 2011, by Curatus Trust Company (Mauritius) Ltd. In the Florida Action, Curatus claimed against ALG and others (but not Mr Faure Walker or Mr Mace) in relation to the events leading up to the IPO. The allegations made by Curatus against ALG in the Florida Action are pleaded in some detail in the present proceedings and, later in this judgment, I will summarise that pleading. In brief summary, the Plaintiffs in the Florida Action claim substantial damages from ALG and others which damages are said to have been the result of the Plaintiffs losing the substantial sums which they were persuaded to invest in ALG by allegedly false and misleading statements being made on behalf of ALG as part of the IPO.

[12]ALG’s pleaded case in the present proceedings also refers to an action brought by a Mr Wright against ALG. Sometime in 2013, Mr Wright issued proceedings in Florida against ALG and, on 24 September 2013, he obtained a default judgment in those proceedings against ALG. It is pleaded in the present proceedings that Mr Wright’s claim against ALG arose out of substantially the same facts and matters as were alleged by Curatus in the Florida Action. The present proceedings also allege that ALG faces other potential claims arising out of the matters pleaded in the present proceedings.

[13]There was another action, also in Florida, which is not referred to in ALG’s pleadings in the present action but which is referred to in the assignment of 1 June 2013. I will refer to that other action as “the Pratt proceedings”. These were derivative proceedings brought by Mr Pratt, a shareholder in ALG. The initial pleading of the claim in those proceedings was dated 12 August 2011 and that pleading was amended on 15 September 2011 and 11 June 2012. After the assignment of 1 June 2013, referred to above, the claim was further amended on 6 June 2013 to substitute the trustee of the ALG Recovery Trust for Mr Pratt as the Plaintiff.

[14]The Pratt proceedings, which have now been taken over by the trustee of the ALG Recovery Trust, name three Defendants. The first named Defendant is ALG itself. However, no relief is claimed against ALG and it seems that it was initially joined as a Defendant because the proceedings were initially derivative proceedings in which a shareholder, Mr Pratt, was asserting causes of action which were vested in ALG. The real Defendants in the Pratt proceedings were Mr Mace and a Mr Krawczyk. The claim was brought to recover losses allegedly suffered by ALG by reason of the alleged wrongdoing of Mr Mace and Mr Krawczyk. Mr Krawczyk is described in the Pratt proceedings as the chief financial officer of ALG.

[15]The pleadings by the Plaintiff in the Pratt proceedings set out a number of matters under the heading:

“General Allegations”

. Under that heading, the Plaintiff makes statements as to the purposes behind the establishment of ALG and its date of formation. Under the same heading, it is pleaded that ALG completed an IPO on AIM at the London Stock Exchange on 13 August 2007 to raise capital to pursue its business ventures. It was then pleaded that in connection with the IPO, ALG acquired various assets.

[16]The pleadings in the Pratt proceedings contain more detailed allegations about the Tierra del Sol project. These are followed by allegations as to failings by Mr Mace and Mr Krawczyk both of whom, it is said, allowed millions of dollars to be wasted or misappropriated. These allegations are particularised and relate to the management of ALG following the raising of capital and the acquisition of assets as a result of the IPO. There are detailed allegations as to a Mr Meyer misappropriating ALG’s funds and the failure of Mr Mace and Mr Krawczyk to prevent that. It is then said that ALG’s losses are attributable to breaches of duty by Mr Mace and Mr Krawczyk and damages are claimed accordingly.

The Assignment

[17]The assignment dated 1 June 2013 was in these terms:

“ASSIGNMENT OF CLAIM THIS ASSIGNMENT is made by and on behalf of American Leisure Group, Limited (hereinafter, “ALG”) to the ALG Recovery Trust, which was duly constituted and settled on June 1, 2013, for purposes of prosecuting certain claims, choses-in-action, and lawsuit rights (hereinafter, “Claims”). NOW, THEREFORE, Simon Reynolds, being the sole remaining director of, and on behalf of, American Leisure Group, Limited, hereby irrevocably assigns, transfers, and conveys any and all Claims held, possessed, or owned, by ALG to the ALG Recovery Trust which arise from, relate to, or otherwise involve the facts, circumstances, and occurrences set forth in the lawsuit currently pending in the case styled, “John Pratt, derivatively, and on behalf of, American Leisure Group, Limited v American Leisure Group, Limited, David Mace, and Robert Krawczyk,”

Case No. 2011-CA-010071-0, Circuit Court, Orange County, Florida. THE PURPOSE of this assignment is transfer such Claim rights as ALG holds, possesses, or owns, to the ALG Recovery Trust, with the express intent that the ALG Recovery Trust shall substitute into, or join, the above described lawsuit in order to continue pursuing the claims set forth therein directly against the named defendants. This assignment is made on the condition that the ALG Recovery Trust shall remit the net proceeds recovered from pursuing the lawsuit, after the payment or (sic) legal fees, costs, and reasonable trust administration fees and expenses relating to conducting the Trust’s business. THIS ASSIGNMENT is made this 1st day of June, 2013. THIS ASSIGNMENT is made by and on behalf of American Leisure Group, Limited (hereinafter, “ALG”) to the ALG Recovery Trust, which was duly constituted and settled on June 1, 2013, for purposes of prosecuting certain claims, choses-in-action, and lawsuit rights (hereinafter, “Claims”). NOW, THEREFORE, Simon Reynolds, being the sole remaining director of, and on behalf of, American Leisure Group, Limited, hereby irrevocably assigns, transfers, and conveys any and all Claims held, possessed, or owned, by ALG to the ALG Recovery Trust which arise from, relate to, or otherwise involve the facts, circumstances, and occurrences set forth in the lawsuit currently pending in the case styled, “John Pratt, derivatively, and on behalf of, American Leisure Group, Limited v American Leisure Group, Limited, David Mace, and Robert Krawczyk,” Case No. 2011-CA-010071-0, Circuit Court, Orange County, Florida. THE PURPOSE of this assignment is transfer such Claim rights as ALG holds, possesses, or owns, to the ALG Recovery Trust, with the express intent that the ALG Recovery Trust shall substitute into, or join, the above described lawsuit in order to continue pursuing the claims set forth therein directly against the named defendants. This assignment is made on the condition that the ALG Recovery Trust shall remit the net proceeds recovered from pursuing the lawsuit, after the payment or (sic) legal fees, costs, and reasonable trust administration fees and expenses relating to conducting the Trust’s business. THIS ASSIGNMENT is made this 1st day of June, 2013.

The present proceedings

[18]The Claim Form in the present proceedings was issued on 7 August 2013. The Claim Form set out brief details of the claim. On 6 December 2013, ALG served its Particulars of Claim. On 5 October 2015, ALG amended its Particulars of Claim to give effect to the order made by the Deputy Judge on 28 September 2015. For present purposes, I can summarise the assertions in the Particulars of Claim as follows:(1) On or about 13 August 2007, ALG issued 62,500,000 shares by way of a placing to various investors;

(2) At the time of the placing, Mr Faure Walker and Mr Mace were directors and officers of ALG;

(3) Curatus Trust Company (Mauritius) Ltd had brought the Florida action against ALG;

(4) In the Florida Action, Curatus alleged that:

a. it invested in excess of $400 million in ALG on the strength of the documents issued by ALG as part of the IPO;

b. the documents issued by ALG as part of the IPO were materially false, inaccurate and misleading in various respects; in particular, the documents falsely stated that ALG had sufficient working capital for its requirements;

c. if the correct position had been known, the IPO would not have proceeded;

d. ALG made further misleading statements in connection with the IPO in respect of a proposed Debt for Equity swap;

e. If ALG had exercised reasonable care and had disclosed the working capital deficiency, Curatus would not have invested in ALG;

f. Following the IPO, ALG promptly collapsed for lack of working capital;

(5) ALG denied that it was liable to Curatus as claimed in the Florida Action;

(6) Mr Wright had issued proceedings against ALG arising out of substantially the same facts and matters as alleged by Curatus in the Florida Action; on 24 September 2013, Mr Wright had obtained a default judgment against ALG for approximately $31 million;

(7) ALG potentially faced other actions from creditors or alleged creditors arising out of the matters pleaded in the Particulars of Claim;

(8) If ALG was held liable to Curatus in the Florida Action, ALG would claim that its liability to Curatus was due to breaches of duty by Mr Faure Walker and Mr Mace;

(9) ALG’s liability to Mr Wright and any liability it had to other creditors arising out of the matters pleaded in the Particulars of Claim were also due to breaches of duty by Mr Faure Walker and Mr Mace;

(10) Further, and in any event, whether or not ALG was found liable to Curatus in the Florida Action, if Mr Faure Walker and Mr Mace had not been in breach of duty to ALG then the IPO would not have proceeded (or would not have proceeded in the way in which it did) and ALG would not have failed, alternatively the losses ALG suffered from its failure would have been reduced;

(11) Accordingly, Mr Faure Walker and Mr Mace were liable for all of ALG’s losses arising from the IPO;

(12) Mr Faure Walker and Mr Mace owed a number of specific duties as directors of ALG;

(13) Mr Faure Walker’s and Mr Mace’s participation in the IPO involved breaches by them of those duties;

(14) Mr Faure Walker and Mr Mace made material misstatements as pleaded by Curatus in the Florida Action;

(15) Mr Faure Walker and Mr Mace mismanaged ALG after the IPO in a number of respects; this allegation was made in paragraph 31.8 of the Particulars of Claim and I will refer to these claims by reference to this paragraph of the pleading; the paragraph 31.8 claims were pleaded in very general terms and lacked particularisation;

(16) If Mr Faure Walker and Mr Mace had not acted in breach of duty, then the IPO would not have happened and ALG would not have failed;

(17) The foregoing had caused ALG loss and damage; these losses were: a. Any liability which ALG had to Curatus; b. Any liability which ALG had to another defendant in the Florida Action; c. ALG’s liability to Mr Wright and any liability of ALG to other creditors arising out of the matters pleaded in the Particulars of Claim; d. If the IPO had not completed then ALG would not have suffered the losses it suffered by reason of the fact that the IPO took place; in particular, if the IPO had not taken place, ALG would not have collapsed but would have been able to sell off its assets as a going concern; e. If Mr Faure Walker and Mr Mace had not been in breach of duty, ALG would not have failed; f. If the IPO had not happened, ALG would not have incurred fees and expenses in relation to the IPO.

The judgment of the Deputy Judge

[19]The judgment of the Deputy Judge dealt with a number of issues which are not relevant to the appeal or cross-appeal. In the parts of his judgment which are relevant for present purposes, he referred to the Florida Action and the Pratt proceedings, to the assignment and to the Particulars of Claim in the present proceedings. He then summarised the submissions of counsel and reached these conclusions:(1) He took account of the purpose of the assignment set out in its first and third paragraphs;

(2) Although the references in the assignment to the causes of action which were being assigned were widely expressed, they were not unlimited;

(3) Because there was no evidence on the point, he did not take account of the possibility that the parties to the assignment might have intended to exclude the subject matter of the present action so as to preserve ALG’s right to claim an indemnity against its liability as a defendant in the Florida Action;

(4) The assignment was not intended to extend to causes of action rising from any fact which merely happened to be mentioned in the pleadings but it was limited to causes of action arising from facts which constituted the essential ingredients of the Pratt proceedings; the reason for the particular language used in the assignment was to cater for the possibility that the Pratt proceedings might subsequently be widened by amendment;

(5) The parties intended to limit the assignment to causes of action having the essential ingredients which were to be found in the Pratt proceedings;

(6) The Pratt proceedings were concerned with alleged breaches of duty occurring when ALG was trading, after the date of the IPO;

(7) It was not necessary to express a definitive view as to the meaning of the assignment and it sufficed to say that the Appellants had failed to establish that ALG had no realistic prospect of success in establishing at trial that it (rather than the assignee) is the proper claimant in respect of its claim for an indemnity against liability arising out of the IPO;

(8) The right to sue in relation to the paragraph 31.8 claims had been assigned by ALG;

(9) The Particulars of Claim in the present action should be amended not only to delete paragraph 31.8 but also to make it clear that the claim was confined to breaches of duty occurring before, or at the time of, the IPO;

(10) If he had not struck out the claims pleaded in paragraph 31.8 on this ground, he would have struck out those claims on the ground that ALG had failed to comply with an order to give particulars of those claims.

The arguments on the appeal

[20]On this appeal, Mr Auld submitted that, on the true construction of the assignment, all of the causes of actions relied upon by ALG in the present proceedings had been assigned away by it. He relied upon the wording of the second paragraph of the assignment. He submitted that the Deputy Judge had wrongly limited the clear and wide wording in that paragraph by giving undue weight and attention to the first and third paragraphs of the assignment. Further, the declaration of the purpose of the assignment in the third paragraph did not state that this was the only purpose or effect of the assignment. It was submitted that it was relevant that, at the date of the assignment, the Pratt proceedings were the only proceedings being actively pursued or defended by ALG. It was submitted that the Deputy Judge had impermissibly read words into the assignment so as to limit the clear effect of the wide words actually used.

[21]Mr Auld relied on the fact that the Plaintiff’s pleading in the Pratt proceedings expressly stated that ALG completed an IPO to raise capital to pursue its business ventures. He submitted that it followed that the causes of action in the present action arose from, or related to or otherwise involved the IPO which was a fact, circumstance or occurrence set forth in the Pratt proceedings. Even on the Deputy Judge’s own test, which was not accepted, the IPO was an essential ingredient of the claim in the Pratt proceedings.

[22]Mr Auld also submitted that the way in which damages were claimed in the various actions was also material to the meaning and effect of the assignment. The claims in the Pratt proceedings included claims in tort, where the cause of action was not complete until damage was suffered. It was submitted that the damages claimed in the Pratt proceedings were the same as the damages claimed in the present proceedings, being losses suffered by ALG after the IPO. Further, ALG and ALG Recovery Trust would be unjustly enriched if ALG succeeded (in the present proceedings) and ALG Recovery Trust also succeeded (in the Pratt proceedings) in recovering damages for the same or overlapping losses.

[23]Finally, it was submitted that it was absurd to think that ALG and ALG Recovery Trust would have wanted to have an assignment of only some of the causes of action vested in ALG. The only reason there was now an issue about the assignment was that ALG and/or ALG Recovery Trust had made a mistake by naming the wrong claimant in the present proceedings in circumstances where that mistake could not now be corrected.

[24]Mr Sinclair for ALG submitted that, subject to the point raised in the Respondent’s Notice, the Deputy Judge was right in his construction of the assignment, essentially for the reasons which he gave in his judgment. The mere fact that a matter was mentioned in passing in the Pratt proceedings did not result in the assignment extending to every cause of action which had anything to do with that matter and where such cause of action depended upon many further facts and matters which were not referred to in the Pratt proceedings. It was only facts which formed the essential ingredients of the causes of action in the Pratt proceedings which were relevant for the purposes of the assignment. On that basis, the passing reference to the IPO in the Pratt proceedings was not an essential ingredient of the causes of action asserted in those proceedings.

[25]Mr Sinclair further submitted that given that ALG was being sued in the Florida Action before the assignment, it was plain that ALG would wish to bring contribution proceedings against third parties arising out of the allegations being made against ALG in the Florida Action. Accordingly, ALG would plainly not have wished to assign away the causes of action which it would need to assert for the purpose of such contribution proceedings.

Discussion and conclusions on the appeal

[26]The parties have so far proceeded on the basis that the assignment is governed by English law and this court was invited to apply English law principles as to the construction of contracts and other documents. I will proceed on that basis.

[27]The parties provided us with a substantial number of authorities as to the relevant legal principles to be applied to the construction of the assignment. It is not necessary to refer to those authorities or to cite from them. The authorities and the principles they establish are all well known. There was, in the end, no disagreement as to the relevant principles. The resolution of this dispute involves a straightforward application of those principles. There is no novelty in the circumstances of this case which requires an examination of the authorities.

[28]The assignment must be considered as a whole. There can be no question of disregarding, or giving no weight to, some of its express provisions. The first point to note is the definition of “Claims” in the first paragraph of the assignment. This refers to “certain claims, choses-in-action and lawsuit rights”. The parties have, I think correctly, considered that this definition refers to what would be described in English law as “causes of action”. It should also be noted that the assignment only relates to “certain” causes of action. It is plain that it was not intended that ALG would assign to ALG Recovery Trust all of the causes of action vested in ALG, howsoever arising.

[29]Although one must consider the assignment as a whole, for the purposes of the analysis it is necessary to start somewhere and it is not inappropriate to begin with the words of the second paragraph, not least because they are stressed by the Appellants. The Appellants rightly say that some of the language of the second paragraph is widely expressed. They stress the phrase “arise from, relate to, or otherwise involve”. The scope of the three verbs in that phrase involves some element of overlap and it is probably right to regard the three verbs as progressively widening the scope of the phrase. Similarly, the phrase “facts, circumstances and occurrences” appears wide although there may not be much difference between facts and occurrences. If anything, “occurrences” might be narrower than the general word “facts”. “Circumstances” might be wider than “facts” although I am doubtful about that. Whatever the width of these three nouns, I regard the next words “set forth” as potentially limiting what went before. I would question whether a fact was “set forth” in a document which merely contained a passing reference to it.

[30]Although it is right to begin with a consideration of the natural meaning of the words used in the second paragraph of the assignment, I find that I can derive considerable assistance as to the intended meaning of the second paragraph by attempting to apply it to the pleadings in the Pratt proceedings. I have already summarised the Plaintiff’s pleading in the Pratt proceedings. Paragraphs 11 to 15 of that pleading are under the heading:

“General Allegations”

. The Appellants rely, in particular, on paragraphs 11 and 13 but I will set out the entirety of paragraphs 11 to 15, which were in these terms:

“11. ALG was a company established to create and operate an integrated hospitality management, vacation club, resort development, and travel services group (the “ALG Group”). More specifically, ALG was to acquire, construct, develop, and operate vacation resorts. 12. ALG was formed in May 2007. 13. In order to raise capital to pursue its business ventures, ALG completed an initial offering on the Alternative Investment Market of the London Stock Exchange on August 13, 2007 (the “Offering”). 14. The proceeds of the Offering, like all of ALG’s capital, were to be used for the purposes of the ALG Group’s businesses, such as to develop the ALG Group’s resort portfolio, reduce the ALG Group’s debt, expand the ALG Group’s sales and marketing networks, develop additional business segments, and provide working capital to the ALG Group. 15. Accordingly, in connection with the Offering, the ALG Group acquired several entities which owned or controlled a portfolio of various resort properties in Central Florida.”

[31]These paragraphs of the pleading refer to several facts, but not in any detail, and only by way of general background to the detailed allegations of wrongdoing which follow in that pleading. These paragraphs do not attempt to identify causes of action vested in ALG.

[32]I have found it helpful to consider what the parties must have intended as to the effect of the assignment in relation to various of the facts pleaded as general allegations in paragraphs 11 to 15 of this pleading. I will give some examples in respect of the facts there pleaded, other than the facts pleaded in respect of the IPO. Paragraph 12 of the pleading refers to the formation of ALG. If ALG had a cause of action which was in some way related to its formation, would that cause of action have been assigned by the assignment? For example, if ALG wished to sue the formation agents for charging excessive fees for the formation, it is difficult to think that such a cause of action was intended to be assigned by the assignment. Further, paragraph 11 of the pleading referred to the intention to construct vacation resorts. If ALG had a cause of action against a builder for defective construction, it is difficult to think that such a cause of action was intended to be assigned by the assignment.

[33]The Appellants stress the references in paragraph 13 to the Offering. They say that the Offering, i.e. the IPO, is a fact referred to in the Pratt proceedings and that the present action arises out of the IPO and/or relates to the IPO and/or involves the IPO. However, the causes of action asserted in the present proceedings do not arise simply because the IPO occurred; those causes of action critically depend upon the way in which the IPO was brought about and the specific statements made to investors in connection with the IPO. Many more facts and matters need to be established before ALG would have the causes of action which it asserts in the present proceedings. Those other facts and matters are not mentioned in the Pratt proceedings; to use the wording of the assignment, they are not facts which are “set forth” in the Pratt proceedings. I also note that although the fact that the IPO occurred is referred to in the Pratt proceedings, it is only a background fact. The causes of action in the Pratt proceedings depend upon the allegation that ALG had capital which was wasted by mismanagement after the IPO; it was not legally relevant where that capital came from or how it was raised.

[34]Having attempted to apply the wording of the second paragraph of the assignment to the pleadings in the Pratt proceedings and, in particular, to paragraphs 11 to 15 of those pleadings, I am inclined to conclude that the parties to the assignment did not intend that a bare reference to a fact in those pleadings would result in the assignment by ALG of a cause of action which depended not just on the bare fact mentioned in passing, or by way of background in the Pratt proceedings, but critically depended on many more facts and matters which are nowhere stated in the Pratt proceedings. I am inclined to take this view even before I consider the purpose of the assignment as described in the first and third paragraphs of the assignment.

[35]Having considered paragraph 2 of the assignment and its cross reference to the pleadings in the Pratt proceedings, it is next appropriate to take account of the first and third paragraphs of the assignment. The first paragraph of the assignment is explained by the third paragraph and perhaps adds little of its own as regards the purpose of the assignment. The third paragraph states that the purpose of the assignment is to enable ALG Recovery Trust to continue to pursue the claims set forth in the Pratt proceedings. That wording indicates that the parties intended to assign the causes of action pleaded at that time in the Pratt proceedings. Everyone agrees that the assignment did achieve that purpose. The question is whether the assignment went further and, if so, how much further. It is probably right not to allow the third paragraph to cut down paragraph 2 of the assignment to such an extent that it would prevent the assignee amending the Pratt proceedings to add new claims which arise from, relate to, or otherwise involve, the facts set forth in the Pratt proceedings. I agree with the Deputy Judge that the wording of paragraph 2 would allow the assignee to make amendments of that kind to the Pratt proceedings. It can therefore be said that the wording of paragraph 3 does not say that the sole purpose of the assignment is to assign causes of action already pleaded in the Pratt proceedings. Nonetheless, I consider that the declared purpose in paragraph 3 of the assignment throws important light on what the parties intended to achieve by the assignment. In short, ALG wanted the assignee to take over the claims in the Pratt proceedings. ALG did not restrict the assignment to those claims as they were then formulated. But there is no sign in the third paragraph that ALG wished to assign causes of action which were not related to the matters of complaint in the Pratt proceedings. Accordingly, a consideration of the stated purpose of the assignment strongly reinforces the view I was inclined to reach based on the wording of the second paragraph alone.

[36]There is a further consideration to which I would give weight. At the time of the assignment, ALG was the defendant in the Florida Action. Considering the matter objectively, it would have been natural for ALG to want to claim a contribution from others in relation to its potential liability in those proceedings. It obviously could not assign away that liability. It would therefore be surprising for it to assign away the causes of action which it might have had which would give it a right to a contribution in respect of that liability. The Deputy Judge left this consideration out of account. He said that he could not assume that the parties to the assignment had the Florida Action in their contemplation. He stressed that there was no evidence from ALG that its representatives actually had this consideration in mind. I do not accept this reasoning. For the purpose of construing the assignment one has regard to the background matters which would have been available to the parties to the assignment. The position is looked at objectively. Evidence from one party as to what it subjectively took into account would not be admissible. The absence of such evidence should not lead to the exclusion of this consideration which arises from an objective appraisal of the background facts. Mr Auld submitted that we should find that ALG had overlooked the Florida Action. He submitted that this was because it was not actively defending the Florida Action at the date of the assignment. I consider that we cannot make that finding on the basis of the material before us. Mr Auld’s suggestion is not obviously right in view of the fact that the assignment was dated 1 June 2013 and the present proceedings, which claim a contribution in relation to ALG’s potential liability in the Florida Action, were brought on 7 August 2013. Whatever the facts might turn out to be at trial, the basis for Mr Auld’s submission is not established on the material before us.

[37]I have referred to the submissions made by Mr Auld in relation to the damages claimed in the Pratt proceedings and in the present proceedings. These submissions were not considered by the Deputy Judge and it may be that they are new submissions in the light of the way that the Deputy Judge decided the strike out application in respect of the assignment point.

[38]Mr Auld’s first submission in this regard was to point out that the claims in the Pratt proceedings included a claim in the tort of negligence where the cause of action was not complete until damage resulted. This submission seems to have been directed to meeting the Deputy Judge’s interpretation of the assignment, whereby the only relevant facts for the purposes of paragraph 2 of the assignment were facts which were an essential ingredient of a cause of action in the Pratt proceedings. Mr Auld also submitted that the damages claimed in the Pratt proceedings and in the present proceedings were the same or, at least, overlapped so that if both claims succeeded, there would be unjust enrichment, presumably at the expense of Mr Mace who is a defendant in both sets of proceedings.

[39]I accept that the Pratt proceedings set out facts as to the loss and damage suffered by ALG by reason of the matters alleged in those proceedings. The Pratt proceedings allege that ALG suffered loss and damage when Mr Mace and Mr Krawczyk mismanaged ALG and wasted all of its capital, including capital raised by, or as the result of, the IPO.

[40]In the present proceedings, (apart from any loss which might be said to be attributable to the paragraph 31.8 claims, which I consider later) ALG says that it has suffered a loss which it would not have suffered if the IPO had not occurred. These losses are said to be two-fold:(1) first, ALG has incurred a liability to the Plaintiff in the Florida Action (it may be that this liability will reflect the losses of investors who invested in shares which were not worth what they paid for them, in which case the investors’ losses would be the capital they invested less the value of those shares); and

(2) ALG has lost the value of its assets (logically, this must be a reference to assets which it had before the IPO). On this strike out application, we do not have information as to the factual basis of these claims. In relation to the second of these claims, Mr Auld told us in his reply that if the IPO had not happened, ALG would not have had any significant assets. He told us that ALG had made prior arrangements so that when the IPO took place, ALG received the capital put up by the investors and also received other assets pursuant to these prior arrangements. Mr Sinclair did not suggest the contrary.

[41]I can see that there is an overlap between a part of the loss claimed in the Pratt proceedings and the second head of loss claimed by ALG in these proceedings. However, on the facts as described by Mr Auld, there is no content in the second head of loss claimed in these proceedings unless the claim for the loss of assets relates to the paragraph 31.8 claims. The paragraph 31.8 claims do relate to events after the IPO but they have been struck out, subject to the cross-appeal.

[42]There was discussion at the hearing as to how damages would be assessed in the separate claims in the Pratt proceedings and in these proceedings. The possibility was identified that since all the relevant causes of action were originally vested in the same person, ALG, claims by ALG and/or its assignee could not result in double recovery or recovery on inconsistent bases. The fact that the two sets of proceedings are in different jurisdictions and the further fact that the Pratt proceedings have now been settled (we were told) ought not to affect the principle.

[43]I do not consider that it is appropriate to attempt to analyse these issues in any further detail on this strike out application. The right time to do so, if ever, is at trial when the facts will be found and the court can address issues of this kind, if there are any, which then arise. I do not rule out the possibility that a particular claim to damages put forward in the present proceedings might conceivably have been assigned away by ALG but the submissions before us did not address the detailed pleading with a view to persuading us to remove some part of the claim to damages. The Appellants’ submissions were that the whole claim had to be struck out because all of the causes of action asserted had been assigned.

[44]Having now considered the wording of the assignment as a whole and having attempted to apply its wording to the way in which matters are pleaded in the Pratt proceedings, on the material before this court, I would reach the overall conclusion that the passing reference in the Pratt proceedings to the fact that the IPO took place did not result in an assignment of the causes of action, of the kind now asserted in the present proceedings, which depended upon other facts and matters as to the manner in which the IPO was conducted. Even if there was some room for doubt as to the exact borderline between what was assigned and what was not assigned, on the material before this court, I would be in little doubt that the causes of action asserted in the present proceedings were on the side of that line which produces the result that they were not assigned away by ALG.

[45]I have stated more than once that my conclusions are on the basis of the material before us. The Appellants’ application was to strike out the claim against them. They submit that ALG cannot resist that application by suggesting that it would bring more evidence of the background facts at the trial which would help its case; it is submitted that there is an onus on ALG to put in all the evidence available to it at this stage, and not later. That submission is probably correct but my assessment is that ALG has done enough to resist the application to strike out. The Appellants submit that, conversely, they might obtain material, on disclosure, which could help them to establish background matters which might assist their arguments as to the construction of the assignment. I accept that that is a possibility. I am not able to assess the likelihood of that happening but it does not matter. No one has asked the court to give summary judgment under CPR Part 24 as to the meaning and effect of the assignment. What ALG has to do at this stage is to persuade the court that it has a realistic prospect of success on the construction point at the trial. I would hold that it has demonstrated that it has such a prospect of success. I have also indicated that the assessment of damages in the Pratt proceedings and in these proceedings might give rise to further analysis to avoid double recovery but that it is not appropriate on this strike out application to go more deeply into those matters. I would therefore dismiss the appeal.

The cross-appeal

[46]The cross-appeal by ALG was limited to the position of Mr Faure Walker in respect of the allegations in paragraph 31.8 as to wrongdoing by him in the management of ALG after the IPO. The cross-appeal did not challenge the Deputy Judge’s conclusion that ALG’s cause of action against Mr Mace in respect of the paragraph 31.8 allegations had been assigned by ALG to ALG Recovery Trust. In relation to Mr Mace, ALG now accepts that the causes of action set out in paragraph 31.8 arose from, or related to or otherwise involved the facts, circumstances and occurrences set forth in the Pratt proceedings. However, Mr Sinclair submitted that the causes of action set out in paragraph 31.8, as against Mr Faure Walker, did not come within the words of the assignment because Mr Faure Walker was not even mentioned in the Pratt proceedings. Mr Sinclair also drew attention to the wording of the third paragraph of the assignment which referred to the purpose of pursuing the Pratt proceedings “against the named defendants”; Mr Faure Walker was not a named defendant in the Pratt proceedings, although Mr Mace was.

[47]Mr Auld submitted that the Deputy Judge was right to strike out the entirety of paragraph 31.8 as against both Mr Mace and Mr Faure Walker. He relied on the wide wording of the second paragraph of the assignment which was not cut down by the statement of purpose in the third paragraph. Mr Auld further submitted that, in any event, ALG could not succeed on the cross-appeal because of the Deputy Judge’s finding that even if he had not found that the causes of action pleaded in paragraph 31.8 had been assigned away by ALG, he would have struck out that paragraph by reason of ALG’s failure to comply with an order requiring it to give particulars of that paragraph.

[48]There was discussion as to whether ALG had cross-appealed against the Deputy Judge’s decision that paragraph 31.8 should in any event be struck out for failure to comply with a court order. The Respondent’s Notice simply identified the order which was challenged as the order striking out paragraph 31.8 and sought a variation of that order so that it was limited to the claim against Mr Mace. The Respondent’s Notice did not set out the grounds of the cross-appeal but stated that they were to be found in the Respondent’s skeleton argument. We do not have the skeleton argument which was lodged with the Respondent’s Notice as we were provided with a replacement skeleton argument for the Respondent, following the grant of permission to cross-appeal. That replacement skeleton argument makes no reference to the Deputy Judge’s alternative finding as to striking out paragraph 31.8 for failure to comply with a court order and certainly does not contain any submission that this alternative finding was wrong or should be reversed by this court.

[49]Mr Sinclair submitted that he did not have to state in the Respondent’s Notice that ALG wished to appeal the Deputy Judge’s alternative finding as to striking out paragraph 31.8. He submitted that an appeal should be against an order made by a court not against the reasons for the order. When asked to explain his stance in relation to the Deputy Judge’s alternative finding, he submitted that if this court held that the Deputy Judge was wrong on the assignment point in relation to Mr Faure Walker, then this court should decide for itself whether ALG’s failure to comply with a court order requiring particulars to be given of paragraph 31.8 would justify the striking out of that paragraph. Alternatively, he was prepared to submit that this court should consider the matter as an appeal from the Deputy Judge’s alternative ground for striking out paragraph 31.8 and should allow such an appeal, reversing his finding on that point.

Discussion and conclusion on the cross appeal

[50]I am prepared to assume in favour of ALG that it has a realistic prospect of establishing at a trial that it had not assigned the causes of action pleaded in paragraph 31.8, as against Mr Faure Walker, as distinct from Mr Mace. However, I see no answer to the Appellants’ point that the Deputy Judge made an alternative finding that if ALG had a realistic prospect of establishing that, he would nonetheless strike out paragraph 31.8 by reason of ALG’s failure to comply with a court order.

[51]Mr Sinclair may be technically correct that he did not have to identify separately this finding in the order which was challenged in the Respondent’s Notice as that Notice stated that it was a cross-appeal against the order striking out paragraph 31.8 as against Mr Faure Walker. However, I would have expected the grounds of the cross-appeal and the Respondent’s skeleton argument to have addressed this alternative finding.

[52]I consider that this court should give effect to the Deputy Judge’s alternative finding unless ALG could persuade the court that it was a finding with which an appellate court ought to interfere. In other words, if the alternative finding is not vulnerable to being set aside on appeal, this court should not consider the matter afresh.

[53]Assuming in ALG’s favour that it is open to it to try to persuade this court to hear an appeal against the Deputy Judge’s alternative finding, ALG has really done nothing to persuade us either to permit such an appeal or, still less, to determine it in ALG’s favour. It has not identified grounds of appeal and it has not submitted a skeleton argument dealing with this point. Mr Sinclair dealt with the matter orally at the hearing but he did not identify any alleged error of principle in what was essentially a case management decision. Although some parts of the lengthy procedural history of this action were referred to by Mr Sinclair, we were not taken to the detail of that history. The Deputy Judge, on the other hand, had to consider the procedural history in detail not only for the purpose of making his alternative finding about paragraph 31.8 but also to consider the Appellants’ much wider applications to strike out the whole of the claim by reference to that procedural history. I am not persuaded that I should do anything other than give full effect to the Deputy Judge’s alternative finding with the result that the cross-appeal against his order striking out the claims in paragraph 31.8 against Mr Faure Walker must fail.

The overall result

[54]In my judgment, both the appeal and the cross-appeal should be dismissed.

Lord Justice Tomlinson :

[55]I agree.