Paton v Rosesilver Group Corp [2017] EWCA Civ 158

Case No A3/2015/2367[2017] EWCA Civ 158
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2015] EWHC 1758 (Ch)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Honourable Mr Justice Mann
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 24/03/2017
Before
LORD JUSTICE HENDERSONSIR CHRISTOPHER CLARKE
Between
IAN PATONAppellantROSESILVER GROUP CORP.Respondent
Mr Shaiba Ilyas (instructed by Strafford Law Limited) for AppellantMr Barry Isaacs QC and Mr Ryan Perkins (instructed by Gordons Solicitors Limited) for RespondentHearing Hearing date: 26 January 2017
Judgment

Introduction

[1]This is an appeal by the defendant, Ian Paton (“Mr Paton”), from an order made by Mann J on 1 July 2015 granting specific performance of an agreement for the sale by Mr Paton to the claimant, Rosesilver Group Corp. (“Rosesilver”), of a flat at 47 Belgravia Court, Ebury Street, London SW1 (“the Property”) together with an associated parking space. The order was made on Rosesilver’s application for summary judgment against Mr Paton, which the judge had heard on 11 and 12 June 2015. Mr Paton was the registered proprietor of the leasehold interest in the Property. The contract for sale of the Property by him to Rosesilver had been made on 10 May 2011, and was subsequently varied by a supplemental agreement made between the same parties on 21 May 2013.[2]In his reserved judgment handed down on 19 June 2015, the judge set out some of the wider background to the case and then described the key documents, the pleadings, and the procedural history of the summary judgment application, including a very late application to adduce further evidence (in the form of a witness statement by Mr Paton) which was not made until the first day of the hearing, after Mr Barry Isaacs QC (appearing then, as before us, for Rosesilver) had completed his opening submissions on behalf of his client. The judge ruled against that application on the following day, for reasons which he subsequently gave in the judgment: see [2015] EWHC 1758 (Ch) at [11] to [15].[3]The judge then addressed the defences relied on by Mr Paton, as advanced by counsel then appearing for him, Mr Kavan Gunaratna. The judge grouped those defences under two heads. The first head comprised a group of related arguments which sought to establish that the contract for sale of the Property was in some sense intended to be a security for substantial loans made to Mr Paton and his partner, Ms Amanda Clutterbuck, in order to fund litigation brought by them against a woman known as Sarah Al Amoudi (“the Al Amoudi litigation”), on the alleged understanding that completion of the sale of the Property was not to take place if the litigation had a successful outcome. The judge analysed and rejected these supposed defences at [17] to [39], and no appeal is brought against any of his conclusions in relation to them.[4]The second group of defences involved the role of a solicitor, Mr Stephen Brook, who was at all material times one of the two partners of a firm called Brook Martin & Co. In broad terms, it was said that Mr Brook had acted for both sides in relation to the sale of the Property, without the informed consent of Mr Paton, and/or that he had an undisclosed personal interest in the transaction, with the consequence that the agreement for sale of the Property should be set aside, or it would at least be inequitable to enforce it by specific performance. There was also a vaguely formulated claim that Mr Brook had procured Mr Paton’s entry into the contract by means of undue influence.[5]The judge disposed of the undue influence defence in [41], saying that such allegations could not be allowed to proceed “on the basis of vague statements in evidence, coupled with speculative submissions on the part of counsel”. He then dealt with, and rejected, the conflict of interest points, fairly briefly, in [42] and [43]. It is only the judge’s conclusions on this part of the case which are now challenged by Mr Paton on the present appeal, which is brought with permission granted by Floyd LJ at an oral hearing on 3 November 2015. Floyd LJ refused Mr Paton permission to appeal on a third ground, which sought to argue that the judge had wrongly taken into account, when reaching his conclusions on grounds 1 and 2, evidence which he had ruled inadmissible pursuant to the ruling which he gave on the second day of the trial.[6]The two grounds of appeal for which permission was granted read as follows:
“(1) The learned Judge made an error of fact, in holding that Mr Brook was not acting as Mr Paton’s solicitor in the transaction, or that such a relationship was not vouched for in any way in the evidence. (2) The learned Judge also erred to the extent that he held that Mr Paton had no real prospect of proving that Mr Brook had an undisclosed personal interest in the transaction.”
[7]We also have to deal with another late application to adduce fresh evidence. By an application dated 20 December 2016, Mr Paton sought permission to rely at the hearing of the appeal upon the third witness statement of the same date of Oliver Dykes, the solicitor with conduct of the matter on his behalf, together with the exhibits thereto. The proposed new evidence relates only to the second ground of appeal, so I will consider it in that context.[8]Leaving aside the application to adduce further evidence which he rejected, the evidence before the judge consisted of two witness statements, together with the particulars of claim (as verified by Claire Dawson-Pick of Gordons Solicitors Limited, Rosesilver’s present solicitors) and the original defence (verified on Mr Paton’s behalf by Mr Dykes). A draft amended defence and counterclaim had been produced at the hearing by Mr Gunaratna, which the judge was prepared to take as “encapsulating Mr Paton’s lines of defence” (see the judgment at [15]), but this was never verified by a statement of truth. The evidence in support of the application for summary judgment was provided by Mr Martin Forrester, a fellow of The Royal Institution of Chartered Surveyors, who lives in Switzerland and has at all material times been the sole beneficial owner of the entire issued share capital of Rosesilver, and of a further company called Sator Properties Limited (“Sator”). The evidence in opposition to the application was a statement signed by Ms Clutterbuck on 8 May 2015, apparently drafted for her by Mr Paton, together with a voluminous single exhibit running to 684 pages. There was no evidence in reply.[9]The judge therefore had no evidence before him from Mr Paton himself, even though he was the registered proprietor of the Property who had contracted to sell it to Rosesilver, and even though he had been instrumental in preparing Ms Clutterbuck’s statement. It is relevant to bear in mind that in her judgment in the Al Amoudi litigation, handed down on 20 February 2014 following a 20 day trial in 2013, Asplin J formed a very adverse view of both Mr Paton and Mr Brook as witnesses, and was scarcely less critical of the evidence of Ms Clutterbuck. She found Mr Paton to be “a very unreliable and unsatisfactory witness”, and “generally evasive”, while Mr Brook was also at times “extremely evasive” and an “extremely unsatisfactory witness”. As for Ms Clutterbuck, to the extent that she had direct knowledge of the relevant events, her evidence “was repetitious and guarded”, and she too “was an unsatisfactory witness”: see Clutterbuck and Paton v Al Amoudi [2014] EWHC 383 (Ch) at [21] to [24].

Background

[10]Mr Paton and Ms Clutterbuck are experienced property developers, who have invested in and developed many high-value residential properties in some of the most expensive parts of central London, including Knightsbridge, Belgravia, Chelsea and Westminster.[11]Rosesilver and Sator are companies incorporated in the British Virgin Islands, beneficially owned (as I have said) by Mr Forrester.[12]According to Mr Forrester, it was Mr Brook who introduced Mr Paton to him. Between 2007 and 2010, Sator made a number of loans to Mr Paton which Mr Paton used to finance the acquisition of several properties which rose significantly in value. In April 2010, it was agreed that Mr Paton owed Sator a total of £1.5 million. By then, Sator was unwilling to make further loans to Mr Paton, but Mr Brook then introduced Mr Forrester to Ms Clutterbuck, saying that he had acted for both Mr Paton and Ms Clutterbuck for many years. Mr Forrester had himself been a friend of Mr Brook’s for nearly thirty years. Sator then made a number of further loans to Ms Clutterbuck, between 2010 and 2014. By December 2011, Ms Clutterbuck owed Sator approximately £746,000. On 20 March 2014, Ms Clutterbuck signed a promissory note in favour of Sator, payable on demand, in the sum of £1,458,964.39.[13]The Property was originally purchased by Mr Paton in November 2006 for investment. The purchase price was £445,000, of which Mr Paton borrowed £356,000 from Bank of Scotland on a buy-to-let mortgage. By October 2014, the borrowing from Bank of Scotland secured on the Property had increased to approximately £555,000.[14]The agreement for sale of the Property by Mr Paton to Rosesilver was dated 10 May 2011 (“the 2011 Contract”). By that date, Mr Paton and Ms Clutterbuck had engaged in, or were about to engage in, two major pieces of litigation from which they hoped to obtain very substantial sums of money if they were successful. One of these was the claim against Ms Al Amoudi; the other related to a joint venture with a Mr Elliot Nichol to develop a property in Cliveden Place, London. In the event, the Al Amoudi proceedings were comprehensively dismissed by Asplin J after the trial in 2013. She refused Mr Paton and Ms Clutterbuck permission to appeal, but they later made a renewed application to this court alleging that the judgment had been procured by fraud. That application was heard, by Longmore LJ and Henderson J, on 28 October 2015, when it was dismissed. As to the litigation involving the estate of Mr Nichol, who had meanwhile died, the judge said at [3] that the fate of those proceedings was not clear to him, but “it was not suggested that they had been successful”.

The contract for sale of the Property

[15]The relevant provisions of the 2011 Contract and the supplemental agreement dated 31 May 2013 (“the Supplemental Agreement”) may be summarised as follows.

(a) The 2011 Contract

[16]The 2011 Contract was drafted by Brook Martin, whose details appear on the front sheet and who are referred to more than once in the document as “the Seller’s Solicitors”. The agreement was expressed to be made between Mr Paton as the seller and Rosesilver as the buyer. The price for the sale was expressed to be £850,000, payable as to £90,000 on the date of the contract, as to £210,000 to Ms Clutterbuck (“prior to the date hereof … in accordance with Clause 26”), and as to £550,000 on completion. The deposit was said to be £300,000, paid either by telegraphic transfer to Brook Martin or by a solicitors’ client account cheque. Completion was to take place at the offices of Brook Martin, upon seven days’ written notice to be served by the buyer upon the seller, when the balance of the purchase money was to be paid by telegraphic transfer to Brook Martin’s client account. A manuscript addition provided that Ms Clutterbuck would deliver vacant possession of the Property upon completion, if she was then in occupation of it.[17]Clause 5 provided that the Property was sold subject to the Standard Conditions of Sale (4th edition), subject to immaterial amendments. Clause 24 was an “Entire Contract” clause, which included an agreement that the contract could only be varied or modified (whether by way of collateral contract or otherwise) in writing under the hands of the parties or their solicitors. By clause 26, Ms Clutterbuck (who signed the contract and also initialled the manuscript additions to it) acknowledged that at Mr Paton’s request Rosesilver had paid £210,000 directly to her before the date thereof, while Mr Paton acknowledged that he had so directed, and that the payment was to be a credit against the purchase price.

(b) The Supplemental Agreement

[18]The Supplemental Agreement was also drafted by Brook Martin, and signed by Ms Clutterbuck as well as Mr Paton and Rosesilver. It recorded the agreement of the parties to vary the 2011 Contract in the following respects:(a) The purchase price was deemed to be £1 million instead of £850,000.(b) For the avoidance of doubt, it was provided that “the Property” should include the associated parking bay at 26 Belgravia Court registered under a separate title number.(c) The sum of £210,000 in clause 26 of the 2011 Contract was deemed to be £360,000, and Ms Clutterbuck and Mr Paton made similar acknowledgments to those which they had previously made in relation to the increased sum.(d) Mr Paton and Ms Clutterbuck further acknowledged that the amounts respectively paid to them to date in cash, amounting in aggregate to £450,000 (i.e. the £360,000 paid to Ms Clutterbuck, and the £90,000 paid to Mr Paton), “were paid by Sator Properties Limited on behalf of the Seller”. The reference to “the Seller” was presumably a mistake for “the Buyer”.(e) Mr Paton agreed to serve a notice under section 42 of the Leasehold Reform Housing and Urban Development Act 1993 so as to make and pursue a claim for a 90-year extension of the lease of the Property, and to sign all necessary documentation for that purpose. On completion, he would assign the benefit of that claim to the buyer for no consideration; but by clause 4 Rosesilver agreed to provide to Mr Paton “all payments due in order to conclude the making of the claim”.[19]By virtue of clause 1.1 of the Supplemental Agreement, any payments made by Rosesilver pursuant to clause 4 were deemed to be included in the increased purchase price of £1 million. Nevertheless, as the judge pointed out, Mr Forrester’s evidence was that the clause 4 payments were intended to be additional to the £1 million.[20]As well as signing the Supplemental Agreement, Mr Paton also executed a transfer in escrow of the Property in favour of Rosesilver. The deed was evidently executed by Mr Paton at Brook Martin’s offices, because his signature was witnessed by a legal secretary at their address (29 York Street, London, W1). This address was also shown on the transfer as the intended address for service for entry in the register of the transferee, Rosesilver.[21]For some 18 months after the date of the Supplemental Agreement, no steps were taken to complete the sale. On 10 October 2014, however, Mr Brook wrote to Mr Paton on the headed notepaper of Brook Martin giving him notice on behalf of Rosesilver that it wished to complete the purchase of the Property in seven days’ time, as provided in the 2011 Contract. Mr Paton refused to complete, and the claim form in the present action was issued shortly afterwards.

Statements of case

[22]Rosesilver’s particulars of claim sought specific performance of the 2011 Contract as varied by the Supplemental Agreement, and/or damages for breach of contract. It was pleaded in paragraph 12 that the increased purchase price of £1 million was intended to be exclusive, not inclusive, of the payments made by Rosesilver in accordance with clause 4 of the Supplemental Agreement. The steps taken to obtain a 90-year extension to the lease in August 2014 were then set out, at a total cost to Rosesilver of £203,254.80. It was also averred that Mr Paton had defaulted under the terms of the first legal charge in favour of Bank of Scotland, in consequence of which Rosesilver had since March 2014 made the necessary payments to prevent the Property being repossessed.[23]Mr Paton’s defence dated 8 January 2015 was settled by his solicitors, Strafford Law. Paragraph 4 included the following averments:
“As at 2011 the property was worth approximately £1.1 million and the Defendant simply would not have sold it for £850,000. The Defendant was induced to enter into the May 2011 agreement by Stephen Brook (“Mr Brook”) a partner of Brook Martin & Co Solicitors (“BM”). In particular: (a) Mr Brook was and had been since approximately 2004 the Defendant’s and Ms Clutterbuck’s solicitor and the Defendant trusted Mr Brook to act in his best interests; (b) in breach of his duties including fiduciary duties to the Defendant, and despite representing BM as being the Defendant’s solicitors, in (and possibly before) and after 2011 Mr Brook was in reality acting primarily or solely for the Claimant and (unknown to the Defendant at the time) acting primarily to promote the best interests of the Claimant and/or Sator at the Defendant’s expense; … (d) as at 2013, the value of the property had increased such that it was worth significantly more than £1.1 million.”
[24]Paragraph 5 then said that by reason, inter alia, of the said breaches of fiduciary duty, Mr Paton was entitled to, and did, treat the 2011 Contract and the Supplemental Agreement as rescinded.[25]The draft, and unverified, amended defence which Mr Paton produced at the hearing before Mann J included the following further material allegations:
“3. At all material times from around 2004 until April 2014 [Mr Brook] was the trusted solicitor and adviser of the Defendant and of [Ms Clutterbuck] especially in connection with their property and finance matters. Mr Brook stood in a fiduciary position towards the Defendant and Ms Clutterbuck who placed their trust and confidence in him always to act in their best interests. … Breach of fiduciary duty 12. Further, at all material times in connection with this matter Mr Brook was acting as solicitor and agent to the Claimant with its authority to conclude contacts on its behalf, as well as solicitor and trusted adviser of the Defendant. Alternatively, Mr Brook had (whether through his wife or otherwise) a connection or financial interest in Sator which was not declared to the Defendant at the time of the agreement. 13. At no stage did Mr Brook take any steps to explain the position to the Defendant such as the implications of his acting for both parties and of his conflict of interest given that he was acting for both the Claimant and Sator as well as for the Defendant or that there were limits as to how far he could advise the Defendant (or Ms Clutterbuck) or tell them all relevant facts because he was also acting for the counterparty to the transaction. Accordingly, at no stage was there full or informed consent by the Defendant (or by Ms Clutterbuck) to Mr Brook’s acting for both sides to the transaction. The Claimant was on notice of Mr Brook’s having failed to obtain such consent.”

Breach of fiduciary duty

[26]I will now set out the three paragraphs in which

the judge briefly dealt with these allegations:

“42. Mr Gunaratna’s last proposed line of defence is rescission on the basis of an undisclosed conflict of interest. In his skeleton argument he said the contract was to be set aside because it was procured by Mr Brook acting in breach of fiduciary duty, and it would be unconscionable for the claimant to rely on it given its notice of that conflict, acquired through Mr Brook who acted as its agent. The conflict is said to arise from Mr Brook’s having some sort of interest in Rosesilver and/or Sator. The draft amended Defence (which I am prepared to take as outlining the nature of the case of Mr Paton) is that Mr Brook was acting as solicitor and agent to the claimant with authority to conclude contracts, as well as the solicitor and trusted adviser of the defendant. There is an alternative plea that Mr Brook had an interest (unparticularised) in Sator. That is said to give rise to an undisclosed conflict of interest. 43. If it were the case that Mr Brook were acting in the transaction as solicitor for Mr Paton, and advising him, while at the same time having some sort of interest in the transaction himself, then there might be case for there being a conflict of duty which might be capable of justifying setting aside the contract. To that extent Mr Gunaratna’s submissions were capable of being based in principle. However, once again the problem for Mr Paton is that they are not based in evidence. The material for supposing that Mr Brook had an undisclosed interest in the transaction is no more than a passing supposition. More importantly, the important fact that Mr Brook was somehow acting for Mr Paton in the transaction is simply not vouched for in any way in the evidence. Once again Ms Clutterbuck’s (and Mr Paton’s) failure to explain how the transaction came about means that an important evidential basis is lacking. Just because he had acted for Mr Paton in the past does not mean that he was acting for him in this matter. Even Mr Paton’s unadmitted witness statement does not demonstrate that Mr Brook was acting for him in this transaction, which is particularly striking bearing in mind that this witness statement must have been created with the draft pleading in mind. 44. In the circumstances this line of defence, too, fails.”
[27]Having set the scene, I can now turn to the two grounds of appeal.

The first ground: was there a breach of the dual employment rule?

[28]Although the first ground of appeal is apparently confined to the contention that the judge made an error of fact, when he held that Mr Brook was not acting as Mr Paton’s solicitor in the transaction, or this relationship was not vouched for in the evidence, that is in reality only part of Mr Paton’s complaint under this heading. If the true position is that Mr Brook was, at least to some extent, acting for Mr Paton in relation to the sale of the Property, while at the same time he was also acting for Rosesilver, the real question is whether there is an argument fit to go to trial that Mr Brook was in breach of a fiduciary duty which he owed to Mr Paton. There is no absolute rule that a solicitor may not act for more than one party in the same transaction. Indeed, there are many circumstances in which this is commonplace, for example where there is no conflict of interest between the parties to a family transaction, or where the same solicitor acts for the purchaser of property and the purchaser’s mortgagee. And even if there is an actual or potential conflict of interest, the solicitor may nevertheless act if he has his client’s informed consent.[29]As Lord Jauncey explained, giving the judgment of the Privy Council on an appeal from the Court of Appeal of New Zealand, in Clark Boyce v Mouat [1994] AC 428 at 435-437:
“There is no general rule of law to the effect that a solicitor should never act for both parties in a transaction where their interests may conflict. Rather is the position that he may act provided that he has obtained the informed consent of both to his acting. Informed consent means consent given in the knowledge that there is a conflict between the parties and that as a result the solicitor may be disabled from disclosing to each party the full knowledge which he possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interests of the other. If the parties are content to proceed upon this basis the solicitor may properly act. … In determining whether a solicitor has obtained informed consent to acting for parties with conflicting interests it is essential to determine precisely what services are required of him by the parties. In this case Holland J was satisfied that Mrs Mouat [the client] was not concerned about the wisdom of the transaction and was “merely [seeking] the service of the solicitor to ensure that the transaction [was] given proper and full effect by way of ascertaining questions of title and ensuring that by appropriate documentation the parties [achieved] what they [had] contracted for.” … Their Lordships are accordingly satisfied that Mrs Mouat required of Mr Boyce [the solicitor] no more than that he should carry out the necessary conveyancing on her behalf and explain to her the legal implications of the transaction … When a client in full command of his faculties and apparently aware of what he is doing seeks the assistance of a solicitor in the carrying out of a particular transaction, that solicitor is under no duty whether before or after accepting instructions to go beyond those instructions by proffering unsought advice on the wisdom of the transaction. To hold otherwise could impose intolerable burdens on solicitors.” “merely [seeking] the service of the solicitor to ensure that the transaction [was] given proper and full effect by way of ascertaining questions of title and ensuring that by appropriate documentation the parties [achieved] what they [had] contracted for.”
[30]As a very experienced Chancery judge, Mann J was undoubtedly well aware of these principles. Nowhere in the evidence before him, however, did Ms Clutterbuck attempt to explain how, or in what circumstances, the sale of the Property to Rosesilver came about. Nor did she say anywhere that Mr Brook acted for Mr Paton in connection with the transaction, let alone produce evidence of his alleged retainer, or of advice which he gave in relation to the transaction, or of bills which he rendered, or of payment of his fees for so acting. As to all these obvious indicia of a substantive relationship between solicitor and client, there was nothing but silence. Nor was the gap filled by Mr Paton, although he was the person best placed to give evidence on the subject, even in his draft statement which the judge refused to admit. But for one matter, therefore, the judge would in my view clearly have been entitled to conclude that there was no credible evidence before him that Mr Brook acted for Mr Paton in a fiduciary capacity in relation to the sale.[31]There is, however, evidence that Mr Brook and his firm did have some role to play in relation to the transaction. As the judge himself recorded at [4], the Seller’s Solicitors were identified in the 2011 Contract as Brook Martin, and it would seem that both the 2011 Contract and the Supplemental Agreement were drafted either by Mr Brook himself or under his direction. Furthermore, the 2011 Contract provided that Brook Martin were to receive the balance of the purchase price on completion, which was to take place at Brook Martin’s offices. It also appears, as I have noted, that Mr Paton executed the transfer of the Property in escrow at Brook Martin’s offices, and more generally it is reasonable to infer that Brook Martin were responsible for all the routine conveyancing aspects of the transaction. Why else would they have been described as the Seller’s Solicitors, with their details prominently given on the front sheets of the two contractual documents? It is therefore puzzling that the judge felt able to say, in [43], that “the important fact that Mr Brook was somehow acting for Mr Paton in the transaction is simply not vouched for in any way in the evidence”. If the judge meant that there was no primary evidence from either Mr Paton or Ms Clutterbuck to substantiate this alleged fact, he was correct; but if he meant that there was no evidence from which such an inference could legitimately be drawn, I respectfully think that he went too far. There was evidence from which it could reasonably be inferred that Mr Brook did indeed act for Mr Paton in relation to at least some aspects of the transaction, including the routine conveyancing needed to implement it.[32]The question that remains, therefore, is whether a reasonable inference to this effect is sufficient to disclose the existence of a triable issue whether Mr Brook owed Mr Paton fiduciary duties in relation to the sale of the Property. If no fiduciary duties were owed, there cannot have been any breach by Mr Brook of the double employment rule. For a number of reasons, I have come to the conclusion that Mr Paton’s case on this critical point is too shadowy to justify the case going to trial. In the first place, there is the complete absence of any relevant evidence from both Mr Paton and Ms Clutterbuck about the origin and purpose of the transaction, and the role of Brook Martin in it. Secondly, they are very experienced litigants, as well as being experienced property investors and developers. The need for them to adduce at least some credible evidence on this central topic can hardly have been overlooked by them, and it is striking that no effort to fill the gap, otherwise than by means of an unverified draft amended pleading, was made even after they had the benefit of legal representation. Furthermore, there can be little doubt that Mr Brook was acting in the fullest sense for Rosesilver in relation to the purchase of the Property. It was Mr Forrester’s uncontradicted evidence that Mr Brook informed him that the original purchase price for the Property “was carefully agreed between him and [Mr Paton]”. The price was intended to reflect the market value of the Property as an investment. Mr Forrester also says that the price was agreed between himself, Mr Paton and Ms Clutterbuck “on the basis that all three of us had the relevant experience to agree a price”. I do not read this as contradicting his evidence that the price had been agreed between Mr Brook and Mr Paton, but rather as confirmation that all three of them were content with it.[33]The picture which emerges, to my mind, is one where Mr Paton (who was well able to look after himself) agreed to sell the Property to Rosesilver, in circumstances which he has chosen not to explain, and in the knowledge that Mr Brook was acting for Rosesilver when it came to agreeing the price. Once the price had been agreed, it obviously made sense for Mr Brook and his firm to look after the conveyancing side of the transaction, not least because Brook Martin had frequently acted for Mr Paton and Ms Clutterbuck in the past. On this view of the matter, any retainer of Brook Martin by Mr Paton in relation to the transaction was of a very limited nature, and gave rise to no real conflict of interest. The law is not concerned, in this kind of case, with conflicts of interest which are merely theoretical: see Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 at 638, per Upjohn LJ, Re Baron Investments (Holdings) Ltd [2000] 1 BCLC 272 at 282 (Pumfrey J) and Marks & Spencer Plc v Freshfields [2004] EWHC 1337 (Ch), [2004] 1 WLR 2331, at [15] per Lawrence Collins J, affirmed on appeal at [2004] EWCA Civ 741.[34]In reaching this conclusion, I have taken into account the contention in Rosesilver’s respondent’s notice that if Mr Brook did act as solicitor in relation to the transaction for both Mr Paton and Rosesilver, Mr Paton was aware of and/or consented to the same. I consider that Mr Paton clearly was aware of, and did consent to, the limited involvement of Mr Brook in the transaction as his solicitor. By instructing Mr Brook to act for him, in the limited way which I have inferred he did, Mr Paton must be taken to have given his informed consent to any conflicts that might in theory have arisen. He therefore cannot complain of any breach of the double employment rule: compare Bristol and West Building Society v Mothew [1998] Ch 1 at 19A-B per Millett LJ.[35]In the circumstances, it is unnecessary for me to consider the further contentions raised in the respondent’s notice which would arise only if Mr Brook had acted in prima facie breach of a fiduciary duty which he owed to Mr Paton. Those contentions were, in short, that:(a) the agreement was affirmed by Mr Paton, in the knowledge that Mr Brook acted as the solicitor in relation to the transaction for both Mr Paton and Rosesilver; and/or(b) Mr Paton is estopped from rescinding the agreement, because he led Rosesilver to believe by his conduct that he intended to affirm the agreement, and Rosesilver then acted to its detriment in reliance on his conduct by making various payments, including the sums paid for the extension of the lease in August 2014, and the further sums paid to avoid repossession of the Property from April 2014; and/or(c) it would be unfair and disproportionate to rescind the agreement, in the light of the above facts, because if Mr Brook did breach his fiduciary to Mr Paton, the more appropriate relief would be an award of equitable compensation against Mr Brook. I will merely indicate that, had it been necessary to rule on these issues, I would have held that the estoppel argument was well-founded, but the other arguments could not be resolved without a trial.

The second ground: did Mr Brook have an undisclosed personal interest in the transaction?

[36]The only relevant allegation in the draft amended defence is that “Mr Brook had (whether through his wife or otherwise) a connection or financial interest in Sator”. No particulars were given of this allegation, nor was it explained how an undisclosed interest of Mr Brook’s in Sator, had it existed, would have vitiated the contract made between Rosesilver and Mr Paton. Sator and Rosesilver were related companies, in the sense that both were beneficially owned by Mr Forrester, but they had separate legal personality and cannot, without more, be regarded as interchangeable.[37]The allegation, such as it is, was considered by

the judge in the context of the undue influence defence, where he said at [41]:

“… Miss Clutterbuck does provide some suggestions that Mr Brook may have some sort of interest in the loans, or in Sator (it is understandable that in the circumstances she may not know of any covert relationship in relation to these matters) but they are no more than suggestions. While the transaction has unusual features (see above) they do not, in my view, even raise a prima facie case of a transaction requiring explanation as that requirement exists in the law of undue influence.”
[38]The only documentary evidence upon which Mr Paton was able to rely before the judge, as providing some support for this allegation, was an email dated 20 June 2014 from Mr Brook to Mr Paton and Ms Clutterbuck, in which Mr Brook said:
“My strategy, as you know, has been to try and so agree things with Martin [i.e. Mr Forrester] that we wait for the outcome of the Nicholl case before he completes the contract to buy in the hope that you will be able to repay your debt to him (for which, as you know, I am now 50% responsible) and the contract can be mutually rescinded.”
[39]Since it was Sator which had made the extensive loans to Mr Paton and Ms Clutterbuck, which they apparently hoped to be able to repay from the proceeds of the litigation involving Mr Nichol’s estate, Mr Brook’s statement that he was now 50% responsible for the debt could perhaps be read as suggesting that he had some kind of interest in the creditor, Sator. Without elucidation, however – and none was provided in the evidence of Ms Clutterbuck – the meaning of the statement is obscure. If anything, it appears to suggest that Mr Brook had undertaken personal responsibility for repayment of 50% of the debt, possibly by incurring some form of secondary liability for it. Moreover, the statement cannot provide support for the proposition that Mr Brook was “50% responsible” for the Sator loans at the time of the 2011 Contract, more than three years earlier. On the contrary, the word “now” implies that Mr Brook’s personal involvement was a recent development. Finally, the words “as you know” imply that Mr Paton and Ms Clutterbuck already knew of Mr Brook’s 50% responsibility, which would be inconsistent with any suggestion of an undisclosed personal interest. This email therefore provides no intelligible support for the allegation of an undisclosed personal interest in Sator, and

the judge was fully entitled to say (in [43]) that:

“The material for supposing that Mr Brook had an undisclosed interest in the transaction is no more than a passing supposition.”
[40]The only remaining question, therefore, is whether the day can be saved for Mr Paton by his application to adduce fresh evidence on the appeal. The application is supported, as I have already said, by Mr Dykes’ third statement dated 20 December 2016. In response, Mr Forrester has filed a short second statement dated 16 January 2017.[41]The principles which the court should follow on an application to adduce fresh evidence on an appeal are well known. CPR rule 52.11(2) provides that:
“Unless it orders otherwise, the appeal court will not receive – (a) oral evidence; or (b) evidence which was not before the lower court.”
[42]The starting point in deciding whether to “order otherwise” is still the decision of this court in Ladd v Marshall [1954] 1 WLR 1489, where Denning LJ said at 1491 that there are three conditions which have to be satisfied, viz:(a) the evidence could not have been obtained with reasonable diligence for use at the trial;(b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, although it need not be decisive; and(c) the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, although it need not be incontrovertible. These principles will normally guide the exercise of the court’s discretion in rule 52.11(2), subject to the overriding objective in rule 1.1(1) of enabling the court to deal with the case justly and at proportionate cost.[43]It is also well established that the normal principles apply where a party seeks to adduce new evidence in support of an appeal against summary judgment: see Aylwen v Taylor Joynson Garrett [2001] EWCA Civ 1171, [2002] PNLR 1, at [49] per Arden LJ.[44]Much of Mr Dykes’ third statement is discursive and argumentative in nature, but the new material which Mr Paton seeks to adduce may, I think, be fairly summarised as follows:(1) First, he exhibits material indicating that Rosesilver is a wholly-owned subsidiary of a company called Highstead Holdings Limited (“Highstead”). Mr Forrester’s evidence shows that this is true, but irrelevant. Mr Forrester is the sole shareholder of Highstead, as well as being the sole shareholder of Sator. The judge was therefore right to rely on Mr Forrester’s evidence that he was the sole beneficial owner of both companies, although it would have been more accurate to say that he was indirectly the sole beneficial owner of Rosesilver, through his intermediate 100% shareholding in Highstead. Mr Forrester’s evidence also shows that Mr Brook has never been a director of either company.(2) Secondly, Mr Dykes produces Land Registry official copy entries which show that the freehold premises at 29 York Street, London, W1 have been owned by Mr Brook since 1999, and were mortgaged by him to Highstead by way of a legal charge dated 10 June 2014. This is no doubt true, but is again irrelevant. The fact that Highstead has a charge over a property owned by Mr Brook from which he conducts his business as a solicitor does not mean, or even suggest, that Mr Brook had an undisclosed interest in Sator or Highstead which could have placed him in a position of conflict when acting for Mr Paton in relation to the sale of the Property to Rosesilver. Mr Dykes also alleges that Highstead’s charge “does not arise out of an “arms length” agreement for mortgage finance in the conventional way”, but again it is impossible to discern the relevance of this allegation, even if true.(3) Thirdly, Mr Dykes claims to have discovered new evidence that “neither Mr Paton nor Ms Clutterbuck ever actually owed substantial monies to [Sator] at all”. The so-called “new evidence”, however, turns out to be an “absence of evidence”, arising from the alleged failure of solicitors acting for Brook Martin, in pending proceedings brought against that firm by Mr Paton and Ms Clutterbuck, to provide copies of Sator’s client ledgers in response to requests made in correspondence by Mr Dykes. This allegation seems to me purely speculative, and to lack any credible foundation. The evidence before the judge included, as I have said, a promissory note signed by Ms Clutterbuck on 20 March 2014, recording that she owed Sator a sum in excess of £1.4 million: see [12] above. Similarly, the evidence in relation to Mr Paton included evidence that he agreed in 2010 that he owed Sator £1.5 million, inclusive of interest: see the judgment at [2], referring to the uncontested evidence of Mr Forrester to that effect. Furthermore, Mr Dykes himself acknowledges that the solicitors acting for Brook Martin have claimed that Sator’s client ledgers are privileged. Mr Dykes does not agree with this, but the present proceedings are not the appropriate forum in which to resolve a dispute of that nature.(4) Fourthly, Mr Dykes seeks to adduce evidence suggesting that payments due from Rosesilver under the agreement for sale of the Property “did not involve physical payments by Rosesilver, but took the form (if anything) of reductions in Ms Clutterbuck’s (purported) indebtedness to Sator”. Mr Dykes also questions whether the £180,000 paid for the extension of the lease actually emanated from Rosesilver. The short answer to these, and related, allegations is that, even if they were established, it is wholly obscure how they would support the second ground of appeal by tending to show that Mr Brook had an undisclosed personal interest in the transaction. I therefore decline to spend further time examining the detail of the allegations, which appear to me at best flimsy and speculative.[45]As to the Ladd v Marshall conditions, Mr Dykes’ evidence comes nowhere near establishing that any of them is satisfied. None of the material would have had an important influence on the outcome of the case below. Most of it is either irrelevant or too speculative to be credible; and in any event it could, with reasonable diligence, have been obtained for use at the hearing in June 2015.[46]For all these reasons, I would dismiss Mr Paton’s application to adduce fresh evidence. It follows that I would also dismiss the second ground of appeal.

Conclusion

[47]If Sir Christopher Clarke agrees, the result is that this appeal will be dismissed.

Sir Christopher Clarke:

[48]I agree.

Cited in 1 later judgment