Daniels & Ors v Deville & Ors [2008] EWHC 1810 (Ch)

[2008] EWHC 1810 (Ch)

Case No HC05C01473

Case No HC06C04500

Case No HC07C00041

Case No HC06C03901

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

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

Date 25 th July 2008

Before

MR JUSTICE LINDSAY

Between

(1) RICHARD JACK DANIELSClaimants

(2) JACQUELINE DORIS DANIELSClaimant

(3) MARTIN GERALD DANIELSClaimant

(4) RICHARD JOHN DANIELSClaimant

(5) CHERYL PATRICIA TOMLINEClaimant

(6) JENNIFER CLAIRE RIDLEYClaimant

(7) ROSEMARIE DANIELSClaimant

(8) PICKENHAM HOMES LIMITEDClaimant

(1) ALAN CHARLES DEVILLEDefendants

(2) NIGEL LEWISDefendant

(3) HEATHER JANE LEWISDefendant

(4) GISBY HARRISON (a firm)Defendant

(5) FAWKON CENTRE LIMITEDDefendant

(6) SAMUEL BEADIE (WALSWORTH) LIMITEDDefendant

(7) SAMUEL BEADIE (INVESTMENTS) LIMITEDDefendant

AND BETWEEN :

Between

(1) RICHARD JACK DANIELSClaimants

(2) JACQUELINE DORIS DANIELSClaimant

(3) MARTIN GERALD DANIELSClaimant

(4) RICHARD JOHN DANIELSClaimant

(5) JENNY RIDLEYClaimant

(6) CHERYL TOMLINEClaimant

(1) SAMUEL BEADIE (PROPERTIES) LIMITEDDefendants

(2) ALAN CHARLES DEVILLEDefendant

AND BETWEEN :

Between

(1) BONDOR DEVELOPMENTS LIMITEDClaimants

(2) NEWTON BYRE LIMITEDClaimant

(3) RICHARD JACK DANIELSClaimant

(4) JACQUELINE DORIS DANIELSClaimant

(5) MARTIN GERALD DANIELSClaimant

(6) RICHARD JOHN DANIELSClaimant

(1) SAMUEL BEADIE (PROPERTIES) LIMITEDDefendants

(2) STEPHEN CORKDefendant

(3) ANTHONY MURPHYDefendant

(4) RICHARD DANIELS HOMES LIMITEDDefendant

(5) RICHARD DANIELS (HITCHIN) LIMITEDDefendant

(6) RICHARD DANIELS DEVELOPMENTS LIMITEDDefendant

(7) DCC (MILTON KEYNES) LIMITEDDefendant

(8) ECHOPOINT LIMITEDDefendant

(9) NEWTON BYRE CONSTRUCTION LTDDefendant

AND BETWEEN :

Between

PICKENHAM HOMES LIMITEDClaimant

PICKENHAM ESTATES LIMITEDDefendant

MR A ULLSTEIN QC, MR R DUDDRIDGE and MR S ILYAS (instructed by Sibley & Co) appeared for Claimants.

MR R TAGER QC and MS M KENNEDY-McGREGOR (instructed by Cartier & Co) appeared for Defendants Deville & Ors and Beadie & Ors.

Hearing Hearing dates: 11 th, 12, 13 th, 14 th, 15 th, 20 th, 21 st, 22 nd, 25 th, 26 th, 27 th, 28 th and 29 th February,

3 rd, 4 th, 5 th, 6 th, 7 th, 10 th, 11 th, 12 th, 13 th, 14 th, 17 th, 18 th and 19 th March,

2 nd, 3 rd, 4 th, 7 th, 8 th, 9 th, 10 th, 11 th, 14 th, 15 th, 16 th, 17 th, 18 th, 21 st, 22 nd, 23 rd, 24 th, 25 th, 28 th and 29 th April,

6 th, 7 th, 8 th and 9 th May 2008

Judgment

[1]There are four actions before me. They can conveniently be called “the Main Action”, “the Loan Notes Action”, “the Receivership Action” and “the Pickenham Action”. In each of them Mr Richard Jack Daniels, members of his family or one or more companies under his or their control are ranged, as Claimants, against Mr Alan Charles Deville and some allies of his or companies controlled by him or by appointees of a company of his as Defendants. As Richard Jack Daniels has a son, Richard John Daniels, who is also party to the proceedings, it became the practice during the hearing to refer to the father as “RJD1” and to the son as “RJD2”. I shall later need to look at the four actions separately but I shall first give a general introduction to the cases.

[2]RJD1, now in his 70s, is a very experienced and often successful property developer and builder. Whilst his developments have not been confined to Hertfordshire and Mid-Bedfordshire, those areas have been his principal areas of operations and those areas are ones in which he plainly has good contacts and in which he has, over 40 or 50 years, attained a fine nose for what agricultural or other land might sooner or later attract planning permission for residential or other development. Needless to say that is a very valuable attribute in a property developer. One witness said that RJD1 was known as “Mr Mid-Bedfordshire”. However, the financial side of his operations was never as well organised, sophisticated or up-to-date as his methods on the planning and development side and in the late 1980s or early 1990s his rather primitive financing arrangements had led to his companies or him being hugely indebted to banks at a time when banks had become less willing to renew loans or to await repayment than had earlier been the case. The companies with which he was associated, though never formally linked within a limited company group structure, were spoken of as the Richard Daniels Group (“RDG”), and, despite that informal group having within it lands which, given patient financing and development, would be likely, over the years, to come into substantial profit, the banks’ patience was exhausted and the RDG was threatened with receiverships and liquidations.

[3]However, RJD1 already knew Mr Deville, a solicitor then practising as such in the firm of Gisby Harrisons of Cheshunt. Mr Deville was experienced in dealings with land and had already, by the early 1990s, been dabbling in and was increasingly interested in property development. Mr Deville was well known to the bankers with whom RJD1 was engaged and had a sound reputation with them; he was a man to whom and to whose companies they were willing to lend. RJD1 and Mr Deville trusted each other at the time and in March 1995 they had entered into a highly detailed written Joint Venture Agreement relating to land at Bancroft, Hitchin, Herts which was later successfully developed in implementation of the arrangements they had made.

[4]The fact that they were co-operating successfully can only have conduced to stronger trust between Mr Deville and RJD1 and to a more impressive picture being capable of being presented to RDG’s bankers. There were broadly tripartite discussions between RJD1, Mr Deville and the banks. Instead of the banks appointing receivers or administrators over RDG companies – a process which inevitably would lead to considerable professional fees and expense and possibly to sales at what, had more time been afforded, would have been seen to be undervalues - the banks instead agreed that they would permit what were initially called informal receiverships under which, over a period of years, the banks would lend to one or more Deville companies which, by arrangement between Mr Deville and RJD1, would then bring the assets within the “old” RDG to fruition by either selling them or developing them, as was opportune, repaying the banks and dividing the remaining spoils between the RDG and Mr Deville and their families as those two might have agreed. It was seen to be important to preserve RDG tax losses so that it became prudent to keep separate companies separate. As several RDG companies included, amongst their officers, shareholders or employees, members of RJD1’s family, those family members, it was foreseen, would probably have to be brought into whatever proposals were agreed.

[5]Encouraged, no doubt, by the current smooth and profitable working of the Bancroft Hitchin development, RJD1, members of his family (including Mr and Mrs Lewis, the Second and Third Defendants) and Mr Deville entered into a new Joint Venture Agreement on Thursday 29th June 1995. It was not in terms limited to any particular areas of land but, remarkably, instead of its being in writing, as had been the one of March of that year, it was only oral (though recorded at least in part by an unsigned and disputable minute) and, despite Mr Deville being a solicitor, was of striking vagueness and incompleteness. The very next day a document called “Proposed Agreement” was signed by Mr Deville and on behalf of the Daniels. There then ensued years in which the informal receiverships continued; the old RDG companies continued to exist, their directors continued to be paid, properties and opportunities were often brought to profit, banks were repaid and there were fresh borrowings.

[6]The business conducted began to go beyond being concerned only with properties or opportunities that had been within the “old” RDG. Daniels companies that had not even existed at June 1995 began to do business within the Joint Venture and began to be referred to as within the RDG and companies began to embark on projects that, as at June 1995, had not been seen to be opportunities for the Joint Venture.

[7]But strains between the participators in the Joint Venture, strains almost encouraged and certainly not inhibited by the looseness of the parties’ arrangements, grew until by Christmas 2000 it had become plain that there was severe discontent with the way the Joint Venture was working; trust had been displaced by mistrust and the Joint Venture, changing as it had over the years and never better than amorphous, could not usefully continue. Negotiations began for a dissolution to take place. There was a so-called Deed of Dissolution (the “DoD”) dated 23rd July 2001 that brought it to an end but even thereafter nothing went smoothly and, despite later dealings and documents, difficulties only got worse. The Main Action was launched by the Daniels’ family with Particulars of Claim settled by leading counsel (not counsel now acting). Proceedings proliferated until there were four further actions and the parties, with increasing hostility, have so proceeded that one might think that each side was determined to bring the other to his knees by costly process. The hearing before me spread itself over 50 days and even during the hearing a fifth action was begun.

Representation

[8]In all the actions Mr Ullstein QC leads Mr Shaiba Ilyas and Mr Robert Duddridge for the Claimants, the Daniels’ side, and Mr Tager QC leads Ms Kennedy-McGregor for the Defendants, the Deville side.

(i) The Main Action

[9]In the Main Action (HC05C01473), begun on 9th June 2005 the Claimants, in order, are now, after amendments, RJD1, his wife Jacqueline, his brother Martin Daniels, RJD2, then Cheryl and Jennifer, two of the three daughters of RJD1 and Jacqueline, then as Seventh Defendant RJD2’s wife Rosemary Daniels and, as Eighth, a Daniels company, Pickenham Homes Limited.

[10]The Defendants to the Main Action, again after amendment, are Mr Deville, Mr Nigel Lewis, a director of Deville companies who is married to the other of the three daughters of RJD1 and Jacqueline, namely to Heather Lewis who is Third Defendant, and then three Deville companies, Fawkon Centre Limited, Samuel Beadie (Walsworth) Limited and Samuel Beadie (Investment) Limited. Mr and Mrs Deville have a son, Samuel, and Mr Deville uses the “Samuel Beadie” name frequently in relation to companies over which he has control or in which he is interested. There will be reference to “the Samuel Beadie Group” or “SBG”.

[11]The principal relief claimed in the Main Action is in part declarations, in part an award of money. The declarations sought relate to particular development sites which, say the Claimants, are and have been assets of the Joint Venture and are to be accounted for accordingly. The sites are called Fawkon Walk and Walsworth Road. If the same are not already within the Joint Venture then, so the Claimants allege, they are to be held by the relevant Samuel Beadie company which holds them on trust, inter alios, for the individual Daniels Claimants. Mr Deville and Mr Lewis, say the Claimants, are required to account for profits they have derived from those sites and there should be an account of the affairs of the Joint Venture. In the taking of that account some particular loan accounts are sought by the Claimants to be repaid to them in priority to payment to other participators in the Joint Venture. Mr Deville is sued in negligence and in breach of such duties as, it is said, he owed to the Claimants as solicitor. RJD1, Martin and RJD2 seek damages for their having been excluded from the business of the Joint Venture.

[12]In the Defence to the Main Action the Defendants resist all relief which is claimed and they counterclaim. If, which is not admitted, the Claimants’ allegations as to the Joint Venture were such as to have called into existence a partnership falling within the Partnership Act 1890 then a partnership account in which the individual claimants would have to bear some 64% of the liabilities of such a partnership would, say the Defendants, be appropriate. There is a counterclaim mounted on that basis. Particular relief is also sought as to two other properties, Squires Close and Cricketers.

[13]There is a reply and defence to counterclaim on behalf of the Claimants. (ii). The Loan Notes Action

[14]In the Loan Notes Action, begun on 22nd December 2006, there are six Claimants and two Defendants. RJD1, Jacqueline Daniels and Martin Daniels are respectively First to Third Claimants. RJD2 and his sisters, Jennifer Ridley and Cheryl Tomline, are Fourth to Sixth Claimants. The First Defendant is Samuel Beadie (Properties) Limited (“SBP”) and the Second is Mr Deville. SBP, although it was at one time beneficially owned by the Daniels and the Deville side, has always been managed by the Deville side (here counting Mr Lewis as on the Deville side).

[15]The relief claimed in the Loan Notes Action is payment of sums alleged to be due to the Claimants from the Defendants under the provisions of certain Loan Notes and a guarantee thereof given by Mr Deville. The defences assert that the Loan Notes are unenforceable and illegal. Fraud and misrepresentation on the Claimants’ part is asserted in both the Defence of the First and Second Defendant and there is a counterclaim in fraud and misappropriation by the First Defendant, together with a Reply to both Defences and a Defence to the First Defendant’s counterclaim. The Loan Notes Action was given the number HC06C04500. (iii). The Receivership Action

[16]In this action the Claim Form was dated the 8th January 2007. The parties are the same as in the Loan Notes Action. In this action the Claimants seek to restrain Joint Administrative Receivers from taking steps as such in relation to either the First Claimant or the Second Claimant or as Joint Administrators or Liquidators of the other Defendants. Declarations as to the invalidity, as alleged, of the appointment of the Joint Administrators are sought. There is not only a defence but also a counterclaim. The counterclaim asserts the validity of such appointments. The counterclaim divides Joint Venture work between the period of the Joint Venture and a dissolution period. The dividing line is the date of the DoD, the 23rd July 2001. An account is sought for the “JV period” and another for the “disposal period”. Particular declarations are sought as to the manner in which and the financial bases on which such accounts are to be taken. There is a reply and defence to the First Defendants’ counterclaim. The action has the number HC07C00041. (iv). The Pickenham Action

[17]Here the Claim Form is dated the 30th June 2005; the action number is HQ05X01863. The parties are Pickenham Homes Limited, a Daniels company, as Claimant and Pickenham Estates Limited, a Deville company, as Defendant. The claim is, on the face of things, more simple than in the other actions; it is simply a claim by the Claimant against the Defendant in respect of alleged inter-company indebtedness. There is a defence and counterclaim. The Claimant (so alleges the counterclaim) had owed money to SBP. The benefit of that debt was, it is claimed, assigned to the Defendant and notice of the assignment had been served. Thus, so alleges the counterclaim, it was not that the Claimant was owed money by the Defendant but, rather that the Claimant owed money to the Defendant. Accordingly, so runs the counterclaim, the Claimant overall owed £262,946 odd to the Defendant and that sum and interest was therefore counterclaimed. There is a reply and defence to counterclaim.

Witnesses

[18]All individual Claimants apart from RJD2’s wife, Rosemary, gave oral evidence and, in addition, there were other witnesses playing relatively minor roles. As for the Defendants, all individual Defendants gave evidence and (again leaving aside witnesses who played relatively minor roles) there was important evidence from Mr David Knight, called by the Defendants, a Chartered Accountant who, whilst never formally appointed to be a or the Financial Director of the RDG, for some years worked on RDG accounts as if he had been.

The Credibility of Four Principal Witnesses

[19]An unfortunate feature of the case is that, in my judgment, each of the principal witnesses, Martin Daniels, RJD1 and RJD2 on one side and Mr Deville on the other, have been untruthful. I do not, of course, mean that everything that each said was a lie but, as to three of them, that their respective evidence included either a lie which was persisted in and not accepted as having that character (as was the case with Martin Daniels and RJD1) or (in Mr Deville’s case) included an untruth by which inevitable questions were sought to be avoided by an untruthful plea of his having failed to have understood the reason which he said was given to him to procure his acting as he had. Each of those three, moreover, gave untruthful evidence with such self-assurance as to give rise to the possibility that a wish that his evidence was truthful had unconsciously fathered a firm conviction that it was. In each case the doubts so engendered were not displaced by the other evidence given and were such as to make the whole corpus of these four persons’ respective evidence unreliable. RJD2’s evidence included untruth but he was more hesitant than his father and uncle.

[20]As this is an important and serious adverse conclusion I see it as right that I should set out the grounds for it at some length. I will take the evidence of the witnesses to whom this conclusion is applicable in turn but, first, I need to say a little as to the background to this subject. As I shall come on to later, there is a document in the case dated, on the face of things, the 22nd June 1996 and which is called “the Confirmatory Joint Venture Agreement” or, for short, the “CJV”. On its front sheet the date 22nd June is put in in handwriting, that of Mr Deville, and the year is typed in, 1996. It was signed as a deed by, inter alios, RJD1, Martin Daniels, RJD2 and Mr Deville. It was, though, actually signed and came into being in May 2002. The back-dating, not of great consequence in itself, became more important because of the purpose behind it and the parties’ explanations for it. No one has pretended, nor could anyone, that the CJV truly described a state of affairs that had existed in and from June 1996, nor as at and from the even earlier 1995 date to which its terms referred. The purpose of the CJV (a subject I shall revert to) could only have been and could not but have been seen by its parties to be to mislead or deceive, a purpose as to which the back-dating was, it seems, thought to be desirable.

[21]In the first pleadings made by the Claimants the document was referred to as if truly a document of 1996. Later, after Mr Deville and some other Defendants had referred to it as a document made, as it was, in 2002, that was accepted by the Claimants in their Reply. So great was that change and other changes between the Claimants’ first position and their intended later one that they were called on to explain the change and to assure the Court that their later version was, indeed, one to which they were properly able to subscribe a statement of truth. Accordingly on the 8th February 2007 Mr Martin Daniels made a witness statement, paragraph 4 of which reads, with my emphasis, as follows: “The CJV was one of a very large number of documents. When the Particulars of Claim were being drafted we took the date of the CJV as its face value (22nd June 1996 is recorded on the document). We simply did not at that stage recall that the document had been backdated. It was only when the defence of the first to third and fifth to seventh defendants was received, which contained the pleading as to the true date of the CJV referred to above, that the claimants remembered the true position: that the CJV had, in fact, been backdated by the first defendant. We therefore admitted that allegation in paragraph 28(1) of our reply. Statement of truth. I believe that the contents of this witness statement are true”.

[22]It is to be noted that Martin there purports to speak not only for himself but for others: it is “the Claimants” who then so remembered. On 6th February RJD1 made a witness statement that indicated that he had read the witness statement of his brother Martin and stated that he confirmed that its contents accorded with his recollection of events. RJD2 made a witness statement on the same date to like effect. All three of them were cross-examined on the subject.

[23]Martin gave evidence on the point first. He accepted that the CJV had been signed in May 2002. He at first said that the year had not been typed in but later was less sure on that and was, in my view, mistaken as to that. In order to explain how it was that at first the Claimants had averred that it had been signed in 1996, he told me that the solicitor acting on the Claimants’ behalf, Mr Sibley, had been told that it had in fact been signed in 2002 but that Mr Sibley and, indeed, the barristers later consulted, had had difficulty in accepting that a solicitor, Mr Deville, could have been party to such a backdating and, so urged Martin, they had been reticent (his word) in accepting that it had been signed in May 2002. The solicitor and counsel acting for the Claimants just could not comprehend, said Martin, that it had been backdated. Great, great difficulties were experienced, said Martin Daniels, in trying but failing to convince the solicitor and barristers acting for them that the document was not a document of the date which it bore. The picture painted by Martin Daniels was of him and his brother repeatedly pressing that the document had been backdated and yet finding it impossible to convince the solicitor and counsel acting for them that that was so.

[24]But then Martin Daniels had put to him his witness statement that had averred that it was only when the defence from others had been received that “the Claimants remembered the true position: that the CJV had in fact been backdated by the first defendant”. It was put to Martin Daniels in cross-examination by Mr Tager that that was nonsense. But Martin denied that it was and denied also that it was a lie intended to mislead the Court. He reiterated that “We couldn’t get the other parties [meaning the Claimants’ own solicitors and counsel] to accept what we were saying about backdating”. Again it was put to him that his witness statement was a lie but he denied that it was. Indeed, he added: “I can't see where it is any different from what I have told you”.

[25]He said that his witness statement said exactly what he had said in evidence orally and that he could not see the “subtle difference” that Mr Tager was referring to. Eventually he did accept that if he was having repeated difficulty convincing his own legal advisers that the document had been backdated he must have had it in mind that it had been backdated and hence that his evidence that that had only been remembered when the other side’s pleading came to hand was untrue. Even then, having accepted that, he declined to accept that his witness statement had been a lie but rather that it was “just badly put”. How anyone could, as Mr Martin Daniels averred, say that he had had “great, great difficulties to persuade them to accept what we were saying” and yet only to have remembered the backdating when the other side’s defence came in is impossible, in context, to explain other than by taking either or both of Martin’s witness statement and his oral evidence on the point to have been untrue. Mr Martin Daniels’ failure to acknowledge that blights his evidence.

[26]The very same point was explored by Mr Tager in cross-examination of RJD1 several days later. He, I would expect, had had the advantage of either having heard Martin’s cross-examination or having been able to read the transcript of it. He said that he could not say that he had noticed at the time, in 2002, that it had been backdated but that he had always had it in mind that it had been signed in 2002. There never was a time, he said, when he thought that he had signed it at a beginning of the joint venture in 1996. As I have mentioned, he had himself made a witness statement confirming that Martin’s witness statement accorded with his own recollection of events. He thus confirmed Martin’s evidence that it was only when the defence was received that “the claimants remembered the true position”. He was taken in cross-examination to Martin’s witness statement from which I have cited above. He had, he said, explained to the Solicitors acting for him that he had signed the CJV in 2002. He reiterated that it had been explained to the Solicitors acting for him that the document had been backdated but that that was not believed by them. Paragraph 4 of his brother’s witness statement, confirmed by him, was put to him as a totally different story but he was quite unable to find an answer for that. As in Martin’s case, either his witness statement or his oral evidence on the point or both were untrue and, given the absence of any other explanations, were deliberately so. He thus put his evidence into doubt.

[27]RJD2, who had similarly verified Martin’s para 4, also gave evidence that the backdating of the CJV had been made clear to the Solicitors then acting for the Claimants but that that had not been believed. He was not pressed with the point as fully as had been his father and uncle but, as was the case with them, it is impossible to see how both his witness statement confirming Martin’s version of the events and his own oral evidence could be reconciled. So much for the Claimants’ evidence on the point, I now look at that given by Mr Deville.

[28]Mr Deville accepted that it was he who had written in the handwritten part of the date on the CJV. It was his firm of solicitors which had prepared the engrossment that had “1996” typed in. As one would not expect a legal secretary, preparing an original document in 2002, to type in “1996” as its date unless instructed to do so, someone in the firm must have given that instruction and it can only have originated from Mr Deville. He said that RJD1 had wanted the 1996 date and he had never fully understood the reason given for the backdating. He accepted that he should never have agreed to do it. It had been indefensible. It was, he said, a matter of considerable shame to him that it had been backdated. He remained shamed by it. The very fullness of his expressions of shame themselves underline that this was no mere arbitrary or pointless back-dating but, as I shall come on to, was a conscious move to mislead or deceive.

[29]I start from the premise that an honest solicitor, finding a client of his or a person with whom he was associated in business wishing to backdate a document (a fortiori if the document was one to which he, the solicitor, was himself to be a party) would remonstrate and refuse to join in the document and, failing that deterring the person, would take particular pains to find out why it was that the person wished to do as he proposed and would then seek to dissuade the person from completing his plan. In context, a man who recognised, as did Mr Deville, that it would be an indefensible thing to do, would seek to establish just why it was (if RJD1 was, indeed, insisting on the backdating) that RJD1 wished to do so, in order to show him that, for example, the end thereby intended to be achieved could not be achieved by backdating or that it could be honestly and lawfully achieved in some alternative way or that the desired end was in any event unachievable by honest means. When, in cross-examination, Mr Ullstein began a line of questions intended to show that the reason which Mr Deville gave as RJD1’s stated reason – that RJD1 was concerned about wrongful trading - Mr Deville said that he had never fully or completely understood the reason why RJD1 had wanted the backdating. In that way he successfully sought to avoid questions, which would inevitably have followed, calculated to show that the back-dated document could not achieve the intended purpose in any event or that the intended end could have been achieved in other ways; that, in truth, Mr Deville must have known that the given reason was inadequate and that it could not possibly have justified his compliant acceptance of a backdating which Mr Deville knew to be wrong.

[30]If I start from the position that Mr Deville was an honest solicitor I cannot accept that if, at first, he had not fully understood the given reason he would not have pressed RJD1 as to the reason for the reprehensible act, nor can I accept that if RJD1 (who was not said to have had any cause to hide his reasons nor any cause not to be candid with Mr Deville at the time) had, indeed, specified his reasons, that Mr Deville, an experienced solicitor, would not have pressed further for details until he did fully understand the reason given. Nor can I see how RJD1 was in any position remorselessly to insist on the backdating as to put Mr Deville, if otherwise minded to behave honestly, in a position in which he had to comply. Mr Deville gave no ground for any compulsion which he was under. Mr Deville may have been untruthful about its being RJD1 who had wanted the backdating. He may, alternatively, be lying about his not having fully understood the reasons given for that backdating. As a further alternative, Mr Deville could be left with the character of a man who was content to join in a misleading or deceptive document, knowing that to be wrong yet persuaded to do so by nothing more compelling than a reason given to him, a Solicitor, which he had not adequately understood and had not pressed to understand. Whichever is the truth, Mr Deville emerges as an unreliable witness, an assessment underlined by a small passage in his oral evidence to me after his re-examination and on a subject on which, as it was not Counsel asking the questions, he was unsure whether the questions were, so to say, “num” or “nonne” questions; where he was not sure which way the questioning might go and unsure which answers might most suit or least harm his case. The questions concerned the use of the word “participators” in the Deed of Dissolution which I shall come on to explain later. He had said in evidence that he understood that the word “participators” had a statutory meaning under the taxes legislation. I asked him whether he had actually checked the meaning in the Taxes Acts? If he had answered in the affirmative there would have been questions about what he had understood to be the meaning of the word and its applicability to the facts in issue. At first he said that he thought that “at the time he would have checked it, yes”. When asked if he was sure of that he said that no, he may not have done and only a few lines later that he could not say that he had. He was trimming in a way that could only diminish confidence in his credibility.

[31]I would not wish to suggest that the only passages that give rise to doubts about the credibility of the four witnesses are the ones that I have mentioned but they are, in my judgment, sufficient to brand each of them as unreliable.

[32]That conclusion elevates the rôle to be played by the more important of the documents in the case and it is thus to them that I turn. Documents The 1995 Minute and other 1995 arrangements

Documents

[33]As I have mentioned, there was a meeting on the 29th June 1995. It had, to judge from the minute of the meeting, the task of agreeing a new vehicle for ventures which Mr Deville “and the Daniels” (i.e. individuals) would enter into. The vehicle chosen was to be a company already in existence, SBP, a company controlled by Mr Deville. SBP had at that time only eight issued shares, they being held by a Mr and Mrs Smith, Mr Deville’s in-laws; held, it was said, by them in trust for Mr Deville’s family. It was agreed that the remaining 92 shares of the £100 authorised capital of the company were to issue, as to 42 shares to Mr and Mrs Smith to be held in trust for the Deville family and 50 to Mr and Mrs Smith to be held for the Daniels’ family. The Daniels’ 50% was to be equally split between RJD1, Martin, Mr Lewis and RJD2. It is unfortunately a typical feature of the documents in this case that they are not quite what they seem to be or that their terms are almost immediately either ignored or then implemented but in a way differing from the way suggested by the particular document itself. Thus the very next day a document agreed by Mr Deville for himself and by Mr Lewis “for and on behalf of the Daniels” records that Mr Deville (who held no shares in SBP) acknowledged that he held 100% of the issued share capital of SBP as to 44% for himself, as to 12% each for Mr Lewis, Martin and RJD2 and 20% for RJD1.

[34]On the same day, 30th June 1995, as it seems, RJD1 declared that he held 20% of the shares in SBP (which he did not) and that he held them as to 4% each for himself and his wife and as to 6% each for two of his three daughters, Cheryl and Jennifer. Despite these changes and confusions, it seems tolerably clear that as at June 1995 there was a form of agreed Joint Venture given effect by way of intended shared beneficial ownership of SBP, which company was to have a formal board consisting only of Mr Deville and Mr Lewis as “statutory officers” but which was to have an “internal operational board” consisting of Mr Deville, RJD1, Nigel Lewis, Martin and RJD2, with RJD1 as chairman. David Knight, the accountant, was to have a role as to bookkeeping and in preparing trial balances, whilst what were called “legals” could be done by Mr Deville’s firm, Gisby Harrison; it was said that they “can act”. As there were three partners in that firm (so that Mr Deville could personally profit to the extent of one-third of what was paid to Gisby Harrison), to off-set that the Daniels would be able to charge a management fee to the extent of one-third of Gisby Harrison’s legal bills. SBP was to have a subsidiary (contemplated, I would think, as a Special Purpose Vehicle), namely Samuel Beadie Limited, because specific and possible projects for the Joint Venture were identified. Again, typically, whilst on the 29th June 1995 the bank mandate was to be that any two of the five of the internal operational board could sign, the next day Mr Deville was to remain sole signatory “for one calendar year to 30.6.97”, a period, needless to say, of two calendar years. Voting rights as between Deville and Daniels were to be equal (it not being noticed that since only Mr and Mrs Smith held shares, no one but they, in the ordinary way under Articles, had any votes).

[35]The form of Joint Venture emerging in 1995 was one in which the vehicle for it would be one or more Samuel Beadie companies but the management of its business, other than in day-to-day terms, was to be delegated to a body outside a formal board of directors; its dividend policy was prescribed and not left to its formal board of directors and its voting rights were to have effect, in aggregate, other than as any Memorandum and Articles would have provided. The Joint Venture was, in other words, even at the outset, not in the form of a company regulated in all respects and only by its Memorandum and Articles but a Joint Venture where a company was to be the chief vehicle but in such a way that the company’s affairs were to be subjected to constraints and were to be led in directions which fell outside ordinary company regulation by Memorandum and Articles. I am put in mind of Ebrahimi v Westbourne Galleries Limited & Others

[1973] AC 360

at 379 where Lord Wilberforce spoke at 379b of there being room in company law for recognition of the fact that, behind a limited company, there can be individuals with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That position, he said, typically arose in one of three kinds of case, the first of which he described – 379f – as “an association formed or continued on the basis of a personal relationship, involving mutual confidence – this element will often be found where a pre-existing partnership has been converted into a limited company”.

[36]In the case before me there was no pre-existing partnership to be converted into a limited company but there had been the Bancroft Hitchin Joint Venture; there was, then, mutual confidence and there were agreed arrangements, as I have mentioned, which went outside and beyond the ordinary company structure defined by a Memorandum and Articles. The arrangement was not a partnership within the terms of the Partnership Act 1890 merely between individuals as that would be to over-lessen the importance of the use of corporations as vehicles, but nor was it only between corporations, as that would belittle the roles of individuals and their acting outside the formal constitutions of the various companies. I doubt it was ever intended to create an 1890 Act partnership of all then-involved companies and all individuals; separate corporate tax losses had been intended to be retained and used by the separate corporations and no “firm name” was ever contemplated, nor was it contemplated that every individual should be the agent of every corporation involved or of the Joint Venture itself. Nor was it understood that any Joint Venturer (by which I mean all individuals and companies) were to be liable for some aggregation of losses or for each other’s civil or criminal wrongs. Instead it was a hybrid form consisting of both individuals and companies, one well capable of being properly described as a joint venture outside the 1890 Act and using one or more companies as its vehicles. I will call this joint venture the “Joint Venture”. It will be noticed that at this point Heather Lewis, Mr Lewis’s wife, had, upon the face of things, no interest whatsoever in the Joint Venture whereas her sisters did. Those sisters, though, did not have a husband who was interested to the extent of 12%.

The 1997 Shareholders’ Agreement 19.8.97

[37]The next document which throws light on the constitutional arrangements between the Joint Venturers is a so-called “Shareholders’ Agreement” of the 19th August 1997. Parties to it were a number of individuals respectively described as “the Shareholders”. They were Mr Deville and all the members of the Daniels family including both Nigel and Heather Lewis (she appearing for the first time). Although parties were described as “Shareholders”, I do not understand any individual to have held shares in each of “the companies” next described, still less in the subsidiaries. SBP and a new company, Matchcatch Limited, were jointly called “the Companies” and Newton Byre Limited, Newton Byre Construction Limited and Bondor (East Anglia) Limited were called “the subsidiary companies”. The “Shareholders” were then further described in the schedule as “founders”. Recital (b) stated that the Shareholders had agreed to enter into the agreement “for the purpose of regulating their relationship with each other and certain aspects of the affairs and their dealings with the Companies”. The “Companies”, a composite of the two of them, it was said, had agreed with the Shareholders that “it” would comply with the terms of the agreement so far as they related to the Companies. The agreement was said to bind the subsidiary Companies. The Shareholders’ Agreement described RJD1, Martin, Nigel Lewis, RJD2 and Mr Deville as the only directors of the Companies, adding that they, too, had agreed to be bound by the agreement.

[38]I do not understand there to have been any formal appointment under the mechanisms of the Articles of SBP or of Matchcatch Limited which had appointed those five as directors. The document provided at its clause 4.1 that each of the directors, defined as the directors of the Companies from time to time, should be offered service agreements in a form approved by 76% of the voting shares of a majority of the Companies. I have not understood that the Memorandum and Articles of either SBP or Matchcatch had any such provision.

[39]At its clause 5 the document provided that each of the Shareholders should exercise his voting rights for the time being in the Companies and take such other steps as for the time being lay within his power to procure that the Companies would not, without the prior consent of the other Shareholders, act in the ways there prescribed. One of the ways so inhibited was that, without the required consent, there was to be no borrowing or lending of any money in excess of £100,000. Another was the entry into any arrangement which would incur capital or revenue expense to the Companies in excess of £1,250,000. There was no provision as to how the Companies’ losses were to be borne although rather special provisions were made as to how individual shareholders should bear, inter se, liability personally incurred by way of support by guarantee or indemnity of obligations of the Companies.

[40]The first schedule to the Shareholders’ Agreement provided for the proportions in which the Companies were beneficially to be owned. As for SBP, the proportions were expressed by way of the respective numbers of 1,000 ordinary shares of £1 each out of a total of 1,000 but the proportions inter se, while still honouring equality between Deville and Daniels, now specified different figures in that, whilst Mr Deville was to hold 500, Heather Lewis, as I mentioned, came in for the first time, as equivalent with her sisters; Nigel Lewis, previously having had 12½% or 12% of a total of 500, now was to have 3.6% of 1,000. RJD1, Martin and RJD2 were no longer to be equal and as for the other of the two “Companies”, Matchcatch Limited, it had been or was then to be called into existence with shares held only by the Daniels side (including Mr and Mrs Lewis).

[41]Matchcatch Limited, which was later renamed Pickenham Estates Limited, requires a little explanation. By the date of the Shareholders’ Agreement of the 19th August 1997 business had been going acceptably well. The “old” RDG companies, the companies which had incurred large debts to the banks and which had been the subject of the informal receiverships, had, in part, successfully traded, with the help and involvement of SBP, and the time had come when it was seen that there was room for companies run entirely by the Daniels, albeit with finance still deriving from SBP or SBP companies. Matchcatch was thus formed with the intention of providing a vehicle for developments outside the “old RDG”, developments involving lands more recently acquired and opportunities for development more recently encountered than as had been the case with the old RDG companies. Mr Deville was to have no beneficial interest in Matchcatch, the beneficial ownership of it, as I have mentioned, being distributed amongst the Daniels family. But he plainly was to have a role in management of Matchcatch as Schedule 3 of the Agreement included a provision that the Board would not proceed with any business of the companies unless the same should have been approved in writing by a majority of the Board with all directors present. The Shareholders’ Agreement was signed by all the “Shareholders”.

[42]There is, in my view, nothing about this Shareholders’ Agreement inconsistent with my view of the Joint Venture as being of the hybrid character which I have mentioned, nor is there anything in it to suggest that the relationship between the so-called Shareholders was one of a partnership within the understanding of the 1890 Act. The form of the Shareholders’ Agreement underlines that what the parties had in mind was a joint venture in which beneficial ownership was fluid; what was to regulate it was not so much formal transfer as whether whatever was proposed from time to time commanded the agreement of the so-called Shareholders, whilst day-to-day business was in the hands of a smaller number.

A Declaration of 12.11.1997

[43]That last point was demonstrated by a Declaration of the 12th November 1997 when, for the first time, there came in Mr Deville’s wife, Susan Mary Deville, for herself and, with her husband, as a party on behalf of their son, Samuel. The ten parties to the Declaration were composed of all the Daniels, the two Devilles and then the two Devilles in their separate capacity as trustees; all were collectively defined as “the Participators”. The declaration spoke of a number of identified companies, six in all, as composing “the Companies”. It is, particularly in the property development world, very common to have “Special Purpose Vehicles” (“SPVs”) formed so that there is a separate SPV for any particular development and, as at the 12th November 1997, Richard Daniels (Hitchin) Limited, Richard Daniels (Homes) Limited and Richard Daniels (Developments) Limited were added to Newton Byre Limited, SBP and Bondor Developments Limited together to form “the Companies”. In the case of Bondor Developments Limited, SBP and Newton Byre Limited their respective but unnamed subsidiaries were included within the meaning of “the Companies”. Matchcatch was defined as the new company. The intended flexibility as to beneficial ownership is further exemplified in that both within the Companies and within Matchcatch there were changes made to it. All ten individual Participators signed the Declaration. Clause 3 provided that “the Company”, presumably meaning any of “the companies” “may have inter-company loan balances and may upon commercial terms effect loans to the New Company”. I do not read that as prohibiting loans between “the Companies” (i.e. not including Matchcatch) at zero interest nor even as prohibiting loans from a “Company” to “the New Company” at zero interest.

The Deed of Dissolution 23.7.01

[44]The next document of constitutional importance is the DoD of the 23rd July 2001. As I mentioned in the introduction, by this time there had been discontent with the way the Joint Venture was working and terms on which it could be dissolved had been negotiated over several months. The DoD sought to cope with the problem that by then, if not before, it was unclear or at least debatable as to what properties and opportunities for development fell within and what without the Joint Venture. Moreover, the DoD recognises that an abrupt end to the Joint Venture by way, for example, of early sales or liquidations, would not be likely to raise the best prices reasonably obtainable, the obtaining of which could take some time. All six of the Daniels, the two Lewises and Mr Deville were collectively referred to as “the Participators”. Mrs Deville was not party to it. Amongst the definitions “the Venture” was defined as “the carrying on by the Participators of the business of property development in relation to the Assets through the medium of the Venture Vehicles.”

[45]The “Venture Vehicles” were defined as the private limited companies listed in the schedule part 2, which named SBP, Bondor (Developments) Limited, Pickenham (Estates) Limited, Newton Byre Limited, Newton Byre (Construction) Limited, Richard Daniels (Developments) Limited and Richard Daniels (Homes) Limited and added the subsidiaries, unnamed, of the first three of those companies. The “Assets” were defined as the Assets “of the Participators” set out in part 1 of the schedule. Some or all of those “Assets” were, strictly speaking, not directly assets of the Participators but assets of one or more of the Companies which had been referred to.

[46]But that first part of the Schedule provides a very important list of what, at the time, were regarded as those “Assets”, by way of lands or opportunities for development. I have no doubt but that the list in Part 1 of the Schedule was carefully composed and intended to be a definitive list of what was to be dealt with by way of the mechanisms of the Joint Venture in what was, in effect, a winding up of the Joint Venture. Recital 2.3 of the DoD provided that the Participators had agreed to terminate the Joint Venture in the manner in which the DoD provides. The DoD was to regulate the dissolution of that venture. Although none of the relevant Companies was a party to the DoD, clause 1 of the operative part of the DoD said it was made with the agreement of the Venture Vehicles and the Participators and that the DoD was the entire agreement between them. An important clause provided that it was to enure until the sale of the last remaining Asset pursuant to the Disposal Programme; at that point the DoD was to terminate. The defined “Disposal Programme” was the sale of Assets to be undertaken as clause 4 of the DoD provided, a disposal on the best financial terms available and in pursuance of a “Disposal Programme” which was to be determined by “the Supervisory Board”.

[47]The defined “Supervisory Board” was to be made up of five representatives, initially being RJD1, Martin, RJD2, Nigel Lewis and Mr Deville. Provision for change amongst the members of the Supervisory Board was included. The Supervisory Board was to act by a majority and there were elaborate provisions for what should occur should a deadlock arise in it. The Supervisory Board was to supervise a Disposal Programme “in the agreed format at Attachment 1”, which had been approved by the Participators. Variation to that agreed format was contemplated within the DoD, presumably such variation being effected by way of the resolutions of a majority of the Supervisory Board.

[48]The Attachment 1, approved by the Participators, was a highly detailed conventional work-out cashflow showing the expected and intended cashflow positions month-by-month from July 2001 to April 2003. There was no express provision such that if, to any lesser or greater extent, the work-out cashflow proved unattainable, then it would be automatically replaced by some other provision; given that variation by the Supervisory Board (subject to quarterly report to the Participators by that Board) was contemplated, that, presumably, was what was intended should the work-out cashflow fail. Equally, there was no express provision for the period of the work-out cashflow being extended beyond April 2003 should that become necessary; that eventuality was presumably intended to be covered by clause 2 which provided, as I have mentioned, that the DoD would enure until the sale of the last remaining asset pursuant to the Disposal Programme, a Disposal Programme which was itself susceptible to variation. It is important to have in mind that in the business in which the Joint Venture was engaged there can be very many years between spotting a development opportunity and negotiating an option agreement to preserve it and the time, years later and after planning hearings and appeals, when a site can be sold for development or, even later, when it has been built upon and is ready for sale.

[49]Just as the DoD was intended, as I would hold, carefully and accurately to describe the properties and opportunities that were then, at its date, within the Joint Venture, so also, in part 3 of its schedule, there was provision in a definitive way which specified individuals’ loan accounts credits as they then stood. Mr Knight said, and I accept, that the DoD’s schedule as to Loan Accounts was agreed between Mr Deville and RJD1 as intended to clear off all claims. Under the initials of each separate Participator a figure is given for his or her then credit balance. Those credit balances were to be repaid as the work-out cashflow provided but, again, there was no express provision for the manner of their payment should the work-out cashflow fail. There was certainly nothing that provided that if the work-out cashflow failed they need not be repaid. On the contrary, clause 3.3.2 of the DoD provided an order of priority in which the sale proceeds arising from the Disposal Programme should be dealt with as follows:- “3.3.2. The Supervisory Board shall account as soon as practicably possible to the Participators in respect of the sale proceeds arising in the Disposal Programme and shall account in the following order of priority in respect of such proceeds:3.3.2.1 Repayment of Bank Borrowing

3.3.2.2 Repayment of sums due pursuant to clause 5 hereof

3.3.2.3 The payment or reservation of tax liability

3.3.2.4 The payment due and payable to creditors

3.3.2.5 All monies will be distributed pari passu to the Participators.” 3.3.2.1 Repayment of Bank Borrowing 3.3.2.2 Repayment of sums due pursuant to clause 5 hereof 3.3.2.3 The payment or reservation of tax liability 3.3.2.4 The payment due and payable to creditors 3.3.2.5 All monies will be distributed pari passu to the Participators.”

[50]“Bank borrowing” was defined as “the principal monies owed by the Venture in respect of the Assets from time to time”. I accept Mr Tager’s submission that within that definition there could be bank borrowing in respect of an Asset even where it was not the borrower from the bank that had acquired the Asset. Where, for example, SBP had borrowed from a bank but had lent on to another Joint Venturer which had then acquired the Asset, that borrowing would nonetheless be principal money owed by the Joint Venturer – in that case SBP - as a bank borrowing. The respective beneficial interests of the Participators were set out as “Venture Shares” not, be it noticed, as company shareholdings, in Part 4 of the Schedule.

[51]Each of the nine Participators signed the DoD.

[52]At the time of the DoD the several companies defined as Venture Vehicles had inter-company loan accounts shown as such in their annual accounts and which, absent provision to the contrary, one could expect to be able to be called upon to be repaid, by each of those companies to another, in the ordinary way applicable to inter-company loans. I have seen nothing that precludes that ordinary consequence. Time after time, year after year, the audited accounts of the Joint Venture Vehicles were signed off by their directors showing inter-company loans as having been paid or received respectively and to be payable by the debtor company within a year (though I have not seen any calling in on the expiry of any year). Mr Knight’s evidence, which I accept, was that whilst they were the auditors, BDO Stoy Hayward insisted that the directors should sign off for the inter-company loans by letter and that “Beadie’s accountants” – referring, I apprehend, to SBP’s accountants or auditors - required the same. In signing off the accounts the directors were indicating that the respective accounts gave a true and fair picture of the financial position of the company concerned. Any advance by SBP to any other Joint Venture Vehicle cannot simultaneously have been an inter-company loan made by SBP and received by the recipient, who acknowledges it to be repayable (whether or not in a year) and yet also to have been a “subvention” which, as Mr Tager rightly pointed out, was just, in the circumstances, a rather grand word for gift. There is no evidence on which I can rely that suggests that items described as inter-company loans were other than properly fitting that description and, in particular, that inter-company loans shown in the accounts and books of Joint Venture Vehicles as sums owing to SBP were other than what they appeared to be, loans from SBP that were repayable by the respective Joint Venture Vehicles concerned.

[53]Clause 6 of the DoD under the heading of “Tax Liability” (a term defined in its recital 1.5), provided:- “All sums due and owing by the Venture or the Venture Vehicles shall be paid in priority to any other payment hereunder”.

[54]The contemplation, as it seems to me, is that inter-company loans amongst the described Venture Vehicles were to be paid and received in the ordinary way, namely pari passu with the other debts. The provisions in this area made by the DoD lead to a need to consider what are the accounting processes contemplated by the DoD.

The Accounting which the DoD Contemplates

[55]The processes required under the DoD could have been better explained within it but I do not understand it to have been intended to regulate the accounts of separate Joint Venture Vehicles, nor to whom they paid nor from whom they were to receive in the ordinary course of their respective businesses. The separate vehicles were left to pay their creditors, as far as they could, in the ordinary way. That, as it should have been, was all left to their respective directors. As a matter of implied obligation – see para 115 below – arising out of the Joint Venture itself, their directors were not to over-reward themselves nor to create unreasonable overheads in their own favour which would unfairly diminish distributable profits and, to that extent, the DoD moderated the conduct of directors rather than of the Joint Venture Vehicles. But what the DoD did intend to regulate were any distributions of the post-DoD distributable profits shown in each Vehicle’s annual accounts ahead of a final accounting and the distribution of the net asset balances shown in their respective balance sheets at the end of their conduct of Joint Venture business, drawn up in a manner comparable to that which, in another context, would be called a Statement of Affairs.

[56]Such distributable profits and such Statement of Affairs balances were to be brought into a Joint Venture “pot” and accounted for as the DoD provided. There were, in other words, to be effectively two types of account; one would be a separate and conventional annual accounting, Vehicle by Vehicle, throwing up, finally (as the Joint Venture had been brought to an end) either a credit or debit balance in each particular vehicle as if on a Statement of Affairs basis at the end of its carrying on of its Joint Venture business and, quite separately, a Joint Venture accounting.

[57]The Joint Venture accounting would deal with the pot made up of those different credit balances pooled together. Where a distributable profit (or what was treated as such) had, for example, been earlier distributed, after the DoD, “on account” to a Participator, that was to be brought back into the credit of the pot; if, after the DoD, a Joint Venture asset was taken out of the Joint Venture without the consent of the Supervisory Board then its net value was to be brought back to the vehicle concerned and to be a feature in the composition of that vehicle’s Statement of Affairs balance. Whilst no one construction avoids all problems, it is only the outcome of the Joint Venture accounting which, as I understand it, is truly intended to be dealt with by clause 3.3.2 of the DoD and which is then to be distributed as that sub clause provides. Thus, let it be supposed that SBP borrowed £1,500,000 from a bank in order to finance the construction of houses on a site which is acknowledged in the DoD to be a Joint Venture “Asset”. To that end, suppose that SBP then advanced the £1,500,000 as an inter-company loan to Newton Byre Construction (NBC), which had the contract for erecting the houses. That inter-company loan would be a feature in both NBC’s and SBP’s accounts and there is nothing that requires that sum not truly to be owing and not truly to be capable of being demanded and received. Suppose then that NBC was unable to pay all its creditors and that a notional Statement of Affairs showed its creditors getting only 45p in the £1. On that Statement of Affairs basis SBP would finally be entitled to receive 45p in the £1 from NBC. SBP, assuming, here, that it is solvent, would have paid or have to pay all the £1,500,000 to the bank and that payment, amongst many others, would have led to its eventual Statement of Affairs type balance, let it be said, being £3,000,000 in credit (including the 45p in the £1 from NBC). That would ordinarily go to its Shareholders.

[58]Equally, let it be supposed, that NBC’s Statement of Affairs throws up a deficit of £2,000,000 all attributable to Joint Venture business. Looking just at the two transactions and the two Vehicles, the Joint Venture pot would be £3,000,000 in credit, to be distributed – pooled with the other Statement of Affairs type credit balances in other Vehicles - under the provisions of clause 3.3.2. As SBP, in this example, would have already repaid the bank borrowing the first distribution out of the pot would not be for SBP’s own bank borrowing but first to any other Joint Venturers’ unpaid bank borrowing and then to the clause 5 Loan Accounts. Next after that (clause 3.3.2.3) would come the personal tax liabilities of Participators in respect of distributions to them and then (3.3.2.4) what was still owed to other Joint Venture Vehicle creditors (thus including the 55p in the £1 to NBC’s creditors in the example) and only finally (3.3.2.5) could there be a distribution from the pooled pot to Participators. Suppose, next, that, say a year after the DoD a Joint Venture Vehicle had helped out a Participator by letting him take £300,000 “on account of” a distribution. He would have to pay that sum into the pot (at all events unless it was plain that even if he had paid it he would be receiving at least that on the 3.3.2.5 distribution to Participators) as otherwise he would be left prematurely receiving that which, if payable at all, would have been payable only under clause 3.3.2.5.

[59]Mr Knight in his evidence indicated that he was against this or any type of final accounting; he would have preferred a computation of profit and loss as the Joint Venture went ahead but he was overruled by the auditors used at the time. This form of accounting has the merit that it leaves only the directors of the Joint Venture Vehicles to regulate their separate businesses, as should be the case, leaving the Supervisory Board dealing with the global Joint Venture net asset balance, if any. That net credit balance would, but for the DoD, go to the Shareholders in the Vehicles. The Shareholders as such were entirely free to provide for themselves a different form of distribution of what otherwise would pass to them and that is what clause 3.3.2 does.

[60]This form of accounting also has the merit that it avoids the embarrassment of the DoD appearing to inflict upon the Joint Venture Vehicles a form of preference between their respective separate creditors (e.g. a vehicle’s tax liability ahead of its general creditors or paying bank borrowing ahead of other creditors) that could become improper were insolvency to be found in any of them. Moreover, this form of accounting, ultimately on a pooled basis, is consistent with the “pooled” way in which directors’ loan accounts were treated in the DoD, they being described not as so much lent to this Vehicle, so much to that, but on an overall basis. Yet further, that there should be only one account, to be the first and also the final account on this basis, is consistent with the DoD being a deed regulating a winding up. The use of a Statement of Affairs framework is appropriate on the same ground – consider Insolvency Act 1986 s.131 and the prescribed form 4.17 in Schedule 4, Part 4 to that Act.

[61]I do not see such a sequence of distribution as unlawful. The creditors of such of the Venture Vehicle companies as were solvent would be paid off in the ordinary way. The creditors of the Venture Vehicle companies that were insolvent would first receive whatever they could receive from the insolvent company itself but then they were to be put in a favourable position, compared with a conventional liquidation, as the Participators would be obliged inter se to make provision for them ahead of Participators receiving profits for themselves beneficially. The provision (in clause 3.3.2.3) of payment or reservation of tax liability is not in breach of the trusts applicable on insolvency as it relates, in my view, to personal tax liability of Participators since, by that stage of the distribution, the tax liabilities of the respective companies would have been provided for so far as the assets of the respective Venture Vehicle companies would have allowed.

[62]Venture Vehicles which are in fact put into liquidation or administration after the system of clause 3.3.2 is exhausted will be dealt with as those respective codes provide. If a vehicle company is left solvent after 3.3.2.4 is completed and not subject to either code, it is to be for its corporators to decide in the usual way whether it shall be wound up, with any distributions in the winding up going to its shareholders for passing on, where appropriate, to those beneficially interested in the distribution.

[63]In fact the work-out cashflow soon failed in the sense that the inflow there indicated did not occur and it may also be that the outflow proved more expensive than the chart had indicated. But, as I read the DoD, that failure, as I have mentioned, did not have the effect of bringing the whole DoD arrangement to an end. The DoD was the fruit of detailed negotiation and preparation, everyone of the Participators was party to it and, as I read it, it so purported to describe the then-present situation as to make a study of the events before it unnecessary. Unless later documents in some way qualify it or undo its provisions the DoD, in my judgment, provides the key to the winding up of the Joint Venture.

[64]I should add this: nothing in it precluded the passing of a development opportunity or development land out of the winding up process which the DoD contemplates and into the hands of any other persons, including any Participators or company controlled by a Participators, so long as that was agreed by the mechanism which the DoD includes. Should the Supervisory Board have duly decided that some particular development or opportunity was not convenient to be undertaken or further pursued by the Joint Venture under the provisions of the DoD then that opportunity or land could be assigned to, for example, a Deville or Daniels company, but that could only occur properly under the provisions of the DoD if the Supervisory Board or all Participators so permitted and decided. A corollary, as it seems to me, is that if anyone as a Joint Venture Vehicle or Participator seeks to assert that the Supervisory Board had chosen not to follow up an opportunity or a development that was listed in the DoD as a development or opportunity of the Joint Venture but instead to assign it to it or him or to a company or person associated with it or him or simply to permit it so to pass then the onus should be on that person to show that that had, indeed, been agreed or knowingly acquiesced in by the Supervisory Board or by all Participators so as to make its assignment to that Participator acceptable. Were some such burden of proof not applicable then it would be far too easy for a Participator who for the time being had day-to-day conduct of some development to appropriate it to himself, an appropriation that would be inimical to the fair winding up process which the DoD contemplated. So much for the DoD for the time being; but was it qualified or undone by later arrangements?

The CJV

[65]Over the course of May and June 2002 the back-dated document, the Confirmatory Joint Venture Agreement or CJV was signed, in various capacities, by Mr Deville, RJD1, RJD2, Nigel Lewis and Martin Daniels. The parties to it were SBP, “the Richard Daniels Group”, Nigel Lewis and (by way of its members) the “Supervisory Board” which, whilst not so described, conformed to the Supervisory Board constituted under the DoD. It is, as I have described, dated the 22nd June 1996 but it refers to the 1st July 1995 as its commencement date. It includes provisions which could not be pretended, and were not stated to be such that they had truly been in existence since 1995 or 1996. Thus it defines “Joint Venturers” in wholly corporate terms as meaning SBP and RDG together; there is no mention of individuals or “Participators”. “RDG” was defined as Bondor (Developments) Limited, Newton Byre Limited, Richard Daniels (Developments) Limited, Richard Daniels (Homes) Limited, Richard Daniels (Hitchin) Limited and DCC Milton Keynes Limited. Clause 1.4 of the operative parts provided: “The Joint Venturers will in due course apply to the Commissioners of Customs and Excise for registration under section 45 of the Value Added Tax Act 1994 as persons carrying on business in partnership with respect to the Joint Venture, and will endeavour to satisfy the Commissioners that they intend to make taxable supplies at such date as is mentioned in paragraph 5 of Schedule 1 to that Act”.

[66]There had been no agreement to that effect before the CJV was agreed in mid-2002.

[67]Clause 2.4 said:

“SBP will retain primary responsibility for the funding of the Joint Venture”

. That may have been capable of being implied into the arrangements made in June 1995 but nothing such had ever been previously expressed.

[68]“The Financier” was defined as meaning SBP and its banking connections and clause 4.1 provided:- “4.1 The specific duties to the Joint Venture of the Financier include: 4.1.1 … 4.1.2 ensuring that funds to meet Development Project Expenditure are made available promptly when they are properly required; 4.1.3 funding the Informal Receivership; PROVIDED ALWAYS that the if financial limit shall be exceeded (the certificate in this regard of the Auditor from time to time of the Financier shall be conclusive) in excess of a calendar quarter the Financier may be [sic] seven days notice; 4.1.4 identify to RDG the Financial Limit due and payable to it by RDG; 4.1.5 require the loan balance to be reduced below the financial limit or; 4.1.6 require that RGD executes and completes the Debenture; 4.1.7 in the event the Debenture is completed RDG may require it to be discharged where the financial limit is repaid.” 4.1.1 … 4.1.2 ensuring that funds to meet Development Project Expenditure are made available promptly when they are properly required; 4.1.3 funding the Informal Receivership; PROVIDED ALWAYS that the if financial limit shall be exceeded (the certificate in this regard of the Auditor from time to time of the Financier shall be conclusive) in excess of a calendar quarter the Financier may be [sic] seven days notice; 4.1.4 identify to RDG the Financial Limit due and payable to it by RDG; 4.1.5 require the loan balance to be reduced below the financial limit or; 4.1.6 require that RGD executes and completes the Debenture; 4.1.7 in the event the Debenture is completed RDG may require it to be discharged where the financial limit is repaid.”

[69]Whilst it might have been capable of being implied into the terms agreed in June 1995 that SBP would be expected to fund the informal receivership, that had never been expressed and the proviso that was contained within 4.1.3 was completely new, as was the reference to the “Financial Limit” which, in the CJV, was defined as £3,000,000. Nor had there previously been any agreement whatsoever that related to the completion of any Debenture, let alone the one defined in the CJV as being one the form of which was set out in Schedule 5 to that instrument.

[70]“Development Project Expenditure” was given a defined and extensive meaning and clause 8 provided that the Financier would provide financial assistance to fund Development Project Expenditure, including by the making or procuring of loans. That, too, was an obligation that was expressed for the first time. Clause 8.2 provided, so far as immediately relevant, as follows:- “Financial assistance provided or procured by the Financier is to be on competitive terms having regard to current market conditions and in particular (but without affecting the general application of the foregoing):- 8.2.1. the rate of interest applicable to a loan provided by a third party may not exceed the yearly rate of three (3) per cent above base rate on the amount for the time being of the loan; 8.2.2. the rate of interest applicable to a loan provided by the Financier (or by a party with whom the Financier is connected) may not exceed the yearly rate of three (3) per cent above base rate on the amount for the time being of the loan;” No such provision had been agreed at any stage before the making of the CJV in 2002.

[71]Clause 6.2. of the CJV provided:- “Property is to be acquired by the Joint Venturers as an asset of the Joint Venture for their respective benefit as tenants in common in the shares to which they are entitled under the Joint Venture.” That had never previously been agreed, nor had it been the practice of the Joint Venture in the interval since 1995.

[72]Clause 11 under the heading “Profit” provided as follows:

“11.1 A profit of the Joint Venture is the amount by which the aggregate proceeds of a Sale exceed or fall short of the Development Project Expenditure.”

Overlooking that therefore a loss could be required to be regarded as a profit the clause continued:

“11.2 SBP, RDG and Nigel Lewis are entitled to share a profit of the Joint Venture in the ratio of:- SBP 15% RDG 74% NL 11% Provided that where in relation to any SPV or subsidiary of SBP or RDG Nigel Lewis shall possess an ordinary shareholding of 11% no profit share shall arise to him under this Agreement but shall enure for the benefit of the SPV or subsidiary in question.”

There was no provision of that character before 2002, nor did that represent a practice that had been followed since 1995. SBP 15% RDG 74% NL 11% Provided that where in relation to any SPV or subsidiary of SBP or RDG Nigel Lewis shall possess an ordinary shareholding of 11% no profit share shall arise to him under this Agreement but shall enure for the benefit of the SPV or subsidiary in question.”

[73]Clause 11.3 provided:

“If a Property has been Sold, but the full amount of a profit made by a Joint Venture has not been quantified, then: 11.3.1. so much of the profit as can be quantified and also so much (if any) as estimated under Clause 11.3.2 to be safe to distribute is to be distributed;”

[74]Clause 11.3.2. made reference to a quantity surveyor making estimates from time to time as to what amounts and profit could be safely distributed and clause 11.3 went on to provide for the case where too much had been distributed and for repayment occurring in consequence. Nothing of that kind had been agreed as part of the Joint Venture, nor had it been the practice of the Joint Venturers.

[75]Clause 15 provided for expert determination of issues that may have arisen and provision was made for reference to the Royal Institution of Chartered Surveyors and the Institute of Chartered Accountants. Again, nothing of that character had been agreed at any time in the interval from the meeting in June 2005 to the moment when the signatures were put on the CJV.

[76]Schedule 5, as I have anticipated, contained a full form of debenture although the person granting the debenture, the resolution of the directors authorising it, the date of repayment and the rate of interest were all left blank.

[77]The CJV makes no mention, from beginning to end, of the DoD; any such mention would, of course, have blazoned the fact that the CJV was not truly an instrument of June 1996.

[78]On the 6th June 2002 David Knight, writing as financial controller of Bondor Developments Limited, told Mr Deville that before BDO Stoy Hayward, the Accountants and Auditors acting for Bondor Developments Limited, would sign off the 2001 accounts they required, inter alia, “a copy of the JV agreement”. On the 3rd September Mr Deville sent to BDO Stoy Hayward a copy of the CJV and in his accompanying letter he wrote:- “The purpose of this note is to set out the JV arrangements between your clients [the Daniels Group] and the Samuel Beadie Group. I enclose: 1. Confirmatory JV agreement dated 22.06.1996 2. Deed of Dissolution dated 23.07.01 3. … 4. … These documents in combination make the position clear…”.

[79]Mr Deville plainly knew of BDO Stoy Hayward’s requirement of a copy of the CJV as a pre-cursor to a signing off of the 2001 accounts and his letter of the 3rd September, both by the dates so given to his listed documents and the layout of the letter, represented to the auditors that the CJV had been made in June 1996 and that it had preceded the DoD. He was thus engaged in misleading BDO Stoy Hayward. I have already dealt at some length with Mr Deville’s oral evidence as to the backdating and his claim that it related to concerns of wrongful trading by RDG. Quite how pretending that the CJV was a document of June 1996 rather than of May or June 2002 would have assisted in improving the position of any RDG company were wrongful trading to be raised against them is far from clear but that some misleading or deception was involved and that Mr Deville was party to it seems, in my judgment, to be inevitable. Indeed, as I have observed, Mr Deville’s shame at what he had done and his acknowledgement of the indefensibility of the backdating are more consistent and perhaps only consistent with his recognising that the CJV was intended to deceive than with the mere insertion of an incorrect date.

[80]On the Daniels’ side, too, there was evidence consistent with the CJV having been intended to deceive. Martin Daniels’ oral evidence was that it “was simply done for bank finance purposes” meaning that it was not intended to have effect according to its letter but was merely to impress a potential funder, although he could not explain why a banker would be more inclined to lend money upon seeing the CJV. It could be, though, that clause 6.2 might suggest to a banker considering lending to SBP that all properties title to which was within Daniels-controlled Joint Venture Vehicles were held beneficially for all Venturers, including SBP, as tenants-in-common. RJD1 had thought that the DoD was the overriding document.

[81]Martin Daniels said that Mr Deville had produced a document which he, Mr Deville, had said he needed for banking purposes and banking purposes only and that was the CJV. Martin Daniels said he took Mr Deville at his word and signed the document. He had not, at the time, understood that it was materially changing the nature of the Joint Venture that had been previously worked on for, by then, seven years. He signed the CJV because he was told by Mr Deville that it was only for the bank. He had not thought that the bank was going to be shown a document that genuinely represented the terms that the parties were agreeing as governing their Joint Venture; if it had been explained to him that it was to take its literal effect he would not have signed the thing. The CJV, he asserted, did not represent the true position as he understood the Joint Venture. He reiterated that he was told that the CJV was a document needed for funding purposes and by that he understood that it was meant to be shown to Lloyds Bank. He presumed it was Lloyds Bank that was to be shown it.

[82]RJD1 said he was led to believe that the CJV was to cement some funding together and so that he signed it and returned it. It was for funding purposes to help further funds. Mr Tager, in cross-examination, said:

“Q. You mean to mislead banks, not to tell them the true position? A. If you like to put it that way. I didn’t. Mr Deville was in charge of all the funding arrangements.”

[83]He could not explain why any bank would have wanted to see the document in order to agree funding. Only one bank could have been interested, possibly Lloyds. Talks were going on with them at the time. The cross-examination continued:- “Q. If you thought that Mr Deville wanted this document to mislead Lloyds, why did you sign it and help him to do something which would be dishonest? A. Exactly. Q. Why did you help him by signing it? A. I didn’t help him. I helped him by signing it because of the need for more funding. Q. Are you saying – A. And what we were told at the time was, we need to sign a document that I’ve got to help with our funding. Q. If that was what you believed, why were you helping Mr Deville to deceive Lloyds Bank? A. I wouldn’t say I was aware it was to deceive. If anything, it was to assist Mr Deville in putting together more funding, or funding.” Q. Why did you help him by signing it?

Q. Are you saying –

[84]It was not his understanding that Lloyds Bank had to be shown a document that was genuinely contractually binding upon the parties to the Joint Venture. To revert to the cross-examination:

“Q. So it was meant to give Lloyds Bank a false picture? A. Not from my point of view. It might have been from Mr Deville’s point of view, but I didn’t think so at the time.”

[85]He always believed that the CJV was to help future funding. He denied that the CJV was the governing agreement that set out detailed terms of the Joint Venture; he denied that it was not simply a piece of paper produced to show to a bank, meaning that that was all it was.

[86]RJD2 said that they were told it was signed simply to gain funding for the venture. Mr Deville had said that just before he, RJD2, signed. That did not make any sense to him because he was not looking after funding. He trusted Mr Deville at the time. The CJV was only meant to be shown to a bank in order to obtain money. When asked whether the CJV was intended to mislead a bank his answer was “I don’t know”. A little later he said that he did not intend to mislead any bank at all but that Mr Deville had told him that he was using the CJV to enable some funding to come forward. It was for raising funding for the Joint Venture. He did not think the CJV was a binding document or, at any rate, he did not think it was binding on him. A little later he did accept that it was binding upon him.

[87]Mr Deville agreed that there was nothing in the CJV that indicated that it amended the DoD. Mr Ullstein, cross-examining him, continued:- “Q. There could not be, because that would have given the game away. A. Correct, my Lord. It would have been obvious that the document was backdated.” A. Correct, my Lord. It would have been obvious that the document was backdated.”

[88]He denied that he had told the Daniels’ directors that the document was needed to obtain further funding; it was, he said, irrelevant to funding. A little later, though, he was taxed with an apparently contemporary note made by Martin Daniels which spoke of him – Deville - giving a rationale for a sequence of documents, namely that they were to demonstrate to funders the true availability of assets for charging by the Beadie companies. He had also written to Mr Martin Daniels speaking of there being, by then, a comprehensive picture for funders and auditors. He conceded, reluctantly as it seemed to me, that one of the reasons why the CJV and other documents came into existence was related to future funders. He denied that he had said to Martin that the CJV was for funding purposes. He said that it was not the case that the Daniels would not be called on to execute the Debenture in the form of which was contained within the CJV.

[89]In my judgment the CJV was drawn up by or upon the instructions of Mr Deville. It affected that it was an agreement of 1996 whereas it was signed only in 2002. It conceals that the system of an informal receivership of which it speaks had been terminated by the DoD and that that system was winding up under the provisions of the DoD, which it is careful not to mention. It affects that the Joint Venture that had existed from 1995 and which was being wound up under the provisions of the DoD had had terms within it that had never existed as terms expressly agreed in 1995 and, in many cases, were terms that could not even have been implied; it invented a funding obligation on SBP and then put a limit on that obligation which had, in neither case, previously existed. It concealed the respective roles and interests of those who had earlier been shown as “Participators” and gave the Joint Venture a wholly corporate appearance which had not been nor was thereafter a true reflection of either what had been agreed in 1995 or of how the Joint Venture had been conducted. It invented, as if established in 1995, an ability in SBP to require a Debenture. Its clause 6.2 gave a false picture of beneficial ownership of properties. It was produced by Mr Deville to auditors as if a document of 1995 and he thereby intended to assist in the procurement of the 2001 accounts on a false basis. Mr Knight’s view, which I accept, was that the auditors, BDO Stoy Hayward, must have inspected the CJV. The fact, if it is one, that the falsity of the basis did not materially contribute to BDO Stoy Hayward’s willingness to produce those accounts does not undo the criticism which it is proper to make of Mr Deville’s conduct in that respect.

[90]It may not have been produced to any banker; there was no proof that it ever had been but no convincing evidence either that it had not. The fact, if such it was, that it was not produced to any bank does not prove that it was not prepared with a view to such a production if necessary. It was later to become the subject of extraordinary contradictions and postures by the Daniels’ side as to whether or not it bound them.

[91]Notwithstanding the weakness of the Daniels’ evidence I do find it credible that, if told that the document was needed for and only for future funding, the Daniels would have been willing to sign it and I find that they were so told by Mr Deville and that they relied on what they were told. I cannot say whether the CJV’s use for funding was merely a purpose which Mr Deville knew the Daniels would agree to and was such as would procure their signatures or was a purpose which he truly had in mind for the CJV in order to create a false picture of the terms of the Joint Venture and how it had been run since its inception. Either way it was a document which was intended to mislead or deceive and not to regulate the Joint Venture at the time it was made. The fact that I cannot be sure who was or was intended to be misled or deceived by it – the Daniels, one or more bankers or auditors – does not detract from the conclusion that that was its aim. Mr Tager acting for Mr Deville, the solicitor who had the conduct of its preparation and who wrote in by hand the day and month of its date, gave as his final explanation of why it was backdated that that was a mystery.

[92]Moreover, as a document purporting to have been made in 1996, a pretence which all its signatories endorsed, it cannot, in my judgment, be taken to have been intended to amend the DoD of 2001. It is also legitimate to query how far it could amend the DoD given that four of the parties to the DoD were not parties to the CJV. I add, further, that no one gave me any reason why, had it been intended to modify the DoD so as to reframe its provisions to accord with some fresh 2002 agreement, that that could not have been done by a honestly-dated-document which could be clearly seen to refer to and to amend the DoD with effect from whatever date the parties then agreed. I cannot regard the CJV as qualifying or replacing any of the provisions of the DoD and, in my judgment, the DoD accordingly still regulated affairs in and after the summer of 2002.

The Trust Deed of 4.9.02

[93]It is far from clear what this instrument does or was intended to do. Not all Participators were party to it nor was it signed on behalf of all of them. It has, as parties, three companies – SBP (called “the Owner”), Bondor Developments Limited (called “the First Trustee”), Pickenham Homes Limited (called “the Second Trustee”) and, aggregated together as one party described as “the Third Trustee”, RJD1, Martin Daniels, RJD2 and Nigel Lewis. It purported to be supplemental to a number of documents - “the Principal Documents” as they were there described - in which the CJV was listed as if ahead in time of all others. It recited that SBP had provided finance for five identified ventures or developments of Bondor, one of Pickenham Homes and five ventures or developments of the individuals lumped together as “the Third Trustee”. Clause 2 provided:

“SUBJECT to the terms and provisions of the Principal Documents the First Trustee the Second Trustee and the Third Trustee shall hold the titles and documents upon trust for the Owner (or as it may direct) absolutely.”

[94]The “titles and documents” so referred to included the descriptions of ventures and developments to which I have referred; in the case of Bondor, they were described by reference to agreements with another party; as to those of Pickenham Homes Limited and of “the Third Trustee” they were identified by reference to title numbers.

[95]When I asked Mr Tager whether the Trust Deed shifted beneficial ownership at all he first said it both did and did not and later said that it did not as between the parties to it. But it does seem to me to acknowledge that, with respect to the eleven developments or ventures it identifies, SBP was to be the absolute beneficial owner, at any rate so far as concerned any interests in those ventures owned by Bondor, Pickenham Homes and the four individuals respectively. Moreover, whilst at first glance I do not see how it can have affected any interests of other Participators, the parties to it, by way of SBP’s joinder included Mr Deville and hence together constituted all the Supervisory Board for the time being of the DoD. It would, in my view, be unduly formalistic to suppose that SBP’s joinder in the Deed did not represent also Mr Deville’s approval of it. The Deed can thus be taken to be an instrument approved by the Supervisory Board of the DoD and hence one capable of taking effect for the purposes of the Joint Venture’s management without the specific consent of every single Participator. I do not see it as affecting any development to which it did not specifically relate but, so far as it concerned those to which it did relate (which include the development called “Cricketers”), I shall deal with it separately under that heading.

Debentures and Administrative Receivers

[96]On the 4th September 2002 Pickenham Estates Limited and Bondor Developments Limited granted Debentures, nominally for £3,000,000 each, to SBP. They specified zero per cent per annum as the applicable interest rate. Each was a floating charge over the whole of that Company’s property. Their respective standard conditions were the same as those in the Debenture next mentioned.

[97]On or about the 13th May 2003 Newton Byre Limited (a company within the definition of a Venture Vehicle as provided in the DoD) granted a Debenture to SBP for £3,000,000. None of the Debentures recites that it was granted pursuant to an obligation in that behalf in the CJV and, in my judgment, they are capable of standing as entirely independent documents, untainted by the weaknesses or worse of the CJV. However, they do closely follow the form of the Debenture that was part of the schedule to the CJV and, like that form, specified interest as being zero per cent per annum. Unlike the CJV form the Debenture holder is now identified and is SBP. Condition 10 of the Conditions in each case provided: “10. The principal moneys hereby secured shall become payable –(a) (A) If the Company makes default for a period of [two] months in the payment of any interest hereby secured;

(b) (B) If an order be made or an effective resolution passed for the winding up of the Company;

(c) (C) If a distress or execution be levied or enforced upon or against any of the chattels or property of the Company and is not paid out within five days;

(d) (D) If a Receiver or Administrative Receiver (within the meaning of the Insolvency Act 1986) is appointed of the undertaking, property or assets of the Company or any part thereof;

(e) (E) If the Company stops payment or ceases or threatens to cease to carry on its business;

(f) (F) If a petition is presented applying for an administration order to be made in relation to the Company. 11. … 12. The registered holder or holders of this Debenture may, in accordance with the provision of the Insolvency Act 1986, at any time after the principal moneys hereby secured shall have become payable, by writing under his or their hand or hands, appoint any person authorised to act as an insolvency practitioner to be an Administrative Receiver of the undertaking, property and assets hereby charged…..”. (A) If the Company makes default for a period of [two] months in the payment of any interest hereby secured; (B) If an order be made or an effective resolution passed for the winding up of the Company; (C) If a distress or execution be levied or enforced upon or against any of the chattels or property of the Company and is not paid out within five days; (D) If a Receiver or Administrative Receiver (within the meaning of the Insolvency Act 1986) is appointed of the undertaking, property or assets of the Company or any part thereof; (E) If the Company stops payment or ceases or threatens to cease to carry on its business; (F) If a petition is presented applying for an administration order to be made in relation to the Company.

[98]There was no provision for a demand having to be made before principal money should become due and no provision for it to be an event of default not to pay principal money on demand. Nor, either, is there a requirement of a prior notice before an Administrative Receiver could be appointed. The clause specified powers which such a receiver would have. Clause 13 made provision for service by the Company but service on the Company was left to the general law. In each case the Debenture was signed by RJD1 and Martin Daniels and in the case of Bondor and Pickenham Estates also by Mrs Daniels as Company Secretary.

[99]Although RJD1’s evidence in this area was splattered with “I can't answer that” to questions to which he should, generally, have been able to provide an answer, it was accepted by him that the May 2003 Debenture was granted with a view to the immediate appointment of receivers. In fact a letter signed by RJD1, RJD2 and Martin Daniels on behalf of Bondor Developments Limited and Newton Byre Limited dated the very day before the Debenture was signed indicated their consent, as Directors of those respective companies, to the appointment of Mr Stephen Cork of the firm of Smith & Williamson, Insolvency Practitioners, as Administrative Receiver of Bondor Developments Limited and Newton Byre Limited. In that circumstance I shall later need to consider as part of the Receivership Action whether, unless that letter is undone, either of those two companies or the signatories to that letter can complain of the appointment of Mr Cork, so long as other required formalities were duly observed; there is estoppel and counter-estoppel pleaded in that action.

[100]Whilst I have been shown an appointment by SBP of Mr Cork and Mr Anthony Murphy as Administrative Receivers of Bondor Developments Limited dated the 10th September 2003, I have seen no corresponding or similar appointment in relation to Newton Byre Limited. However, the Claimants allege a purported appointment in respect of Newton Byre and the Defendants accept that, save that it was a real appointment; so I must assume that the paperwork was complete as to Newton Byre as it was to Bondor. In that case the provisions of condition 12 supra were complied with. In the circumstances, the appointment of Mr Cork and Mr Murphy in respect of both Bondor and Newton Byre Limited was valid as far as the formalities are concerned but both sides, as I have touched on, raise other issues which I shall deal with later.

The Share Purchase Agreement 29.3.05 (“the SPA”)

[101]By this Agreement all members of the Daniels family excepting Heather Lewis and Nigel Lewis sold their respective holdings of shares in Pickenham Estates Limited to SBP for £225,000 to be paid by way of initial payment together with unsecured loan notes of £2,275,000. The several vendors were identified, as were their respective holdings and respective entitlements to the initial payment and to the loan notes. SBP was identified as the “Buyer”. Mr Deville, Nigel Lewis and Heather Lewis were also parties to the agreement. Mr and Mrs Lewis are recited as having sold their own shares in Pickenham Estates Limited to SBP by a separate dealing on the same day. Together the shares sold by the Sellers and those of the Lewises amounted to the whole issued share capital of Pickenham Estates Limited at the time. The Sellers gave extensive warranties. The initial payment was paid and definitive certificates in respect of the loan notes were issued. A cap of £100,000 was put on the prospective liability of the Sellers in respect of breach of warranty, tax and indemnification of the Buyer. Clause 12 provided as follows:

“12.1. This agreement, and any documents referred to in it, constitute the whole of the agreement between the parties and supersede any arrangements, understanding or previous agreement between them relating to the subject matter they cover. 12.2 Nothing in this clause 12 operates to limit or exclude any liability for fraud.”

[102]The SPA does refer in its definition clause to the CJV and to the DoD. The definition clause defines “Joint Venture” as meaning “the contractual joint venture arrangements as established by the Confirmatory Joint Venture agreement”.

[103]It has been sought to say that the effect of clause 12.1, coupled with the references in the SPA to the CJV and DoD, is that the CJV must be taken to supersede the DoD. But, read literally, clause 12.1 no more provides for the CJV to supersede the DoD than for the DoD to supersede the CJV. In the deed the CJV is given the date of the 22nd June 1996 and the DoD that of the 23rd January 2001 so one would not expect to be able to read the CJV as superseding what was described as a later document unless clear express provision was provided to that end. I cannot read clause 12.1 as such a provision. As I read it, its effect is no more than this; if, at any point, the provisions of the CJV or DoD (or any other document referred to in the SPA) are inconsistent with those expressed in the SPA then the SPA’s provision, later in time, shall (but only so far as concerns the inconsistency) supersede the earlier one or ones. It is with that construction of clause 12 in mind that I turn to the later provisions of clause 24 of the SPA.

[104]Clause 24.1 of the SPA begins with what might be regarded as a recital; it says that SBP, the Sellers and Mr and Mrs Lewis had entered into a Joint Venture as defined in the Joint Venture Agreement (the CJV). It is to be noted that Mr Deville is not included in that summary. For reasons I have already given, I cannot regard the Joint Venture as having been regulated by the CJV and I cannot see that clause 12.1 of the SPA can in that respect set the clock back.

[105]Clause24.1 then proceeds with an express provision whereby the CJV was amended. That tends to show that where amendment is contemplated it is intended to be expressly provided for. Clause

24.2 then refers to the Deed of Dissolution and contains no corresponding express provision for any amendment of it. Then at clause

24.3 “The Sellers, the Buyer, Mr Lewis, Mrs Lewis and Mr Deville” agreed as follows:

“(a) that the sale of the Sale Shares to the Buyer pursuant to this agreement and the payment of the Purchase Price is in full and final settlement of all claims, rights and obligations of either party against the other in relation to the Company its Subsidiary Pickenham (Romford) Limited and the Pickenham Property including for the avoidance of doubt but not limited to any claims under the Joint Venture Agreement or Deed of Dissolution in relation to the Company, its subsidiary Pickenham Romford Limited or the Pickenham Property; and (b) that the terms of the Joint Venture Agreement and the Deed of Dissolution shall have no further effect in relation to the Company its Subsidiary Pickenham (Romford) Limited and the Pickenham Property.”

[106]Again it is notable that where some change to an earlier instrument is intended there is express provision in that behalf, in that case in 24.3(b). The provision about full and final settlement is by no means as clear as it might have been because the five parties to the SPA then turn to speaking of claims “of either party against the other”. However, given that the sub-clause begins with a reference to a sale to the Buyer it can have been intended to read that the reference to “either party against the other” was related only to claims by a Seller against the Buyer or by the Buyer against a Seller. There is no other basis in which the five parties can be reduced to two as “either … against the other” requires. On that basis claims by, for example, Mr Deville against any Seller would remain unaffected. Moreover, the claims so settled by clause 24.3 are only those which not only are between a Seller and the Buyer but also are such that they relate to Pickenham Estates, Pickenham (Romford) and the Pickenham Property, a defined term relating to some land and a car park at Havering or Romford. Given that the compromise thus embodied in 24.3 is so limited I do not expect that I shall need to consider it further.

[107]The warranties given by the Sellers included that the unaudited financial statements of Pickenham Estates as at the 30th June 2004 had been prepared in accordance with and complied with the requirements of the Companies Acts and all Statements of Standard Accounting Practice generally accepted in the United Kingdom.

Loan Note Conditions

[108]Samuel Beadie’s loan notes all refer to a loan note instrument of 29th March 2005 and to a Schedule of Conditions. The conditions define as the redemption date a date by now long since passed. No interest was payable on the sums in the loan note unless SBP should have been seven days’ late with any payment, in which case interest was to be paid at 2% above a London inter-bank market rate on the overdue sum until it was paid. The most important condition, for immediate purposes, is that found in the definition clause of the Conditions where the term “Intercreditor Deed” was defined as meaning an Intercreditor Deed of the 29th March 2005 between the noteholders (in other words, the Sellers of the shares in Pickenham Estates Limited), SBP and the Bank of Scotland “pursuant to which …. the noteholders agree to subordinate all monies owed to them by” SBP to the debts of SBP to the Bank of Scotland.

[109]The Intercreditor Deed, duly signed by all necessary parties on the 29th March 2005, defined those members of the Daniels family who had sold shares as “the Subordinated Creditors”. In the Intercreditor Deed the term “BoS Debt” was defined to mean all moneys from time to time due in whatsoever manner to BoS by SBP, including interest. Clause 2 of the Intercreditor Deed, under the heading “Ranking of Debt” provided:- “BoS and the Subordinated Creditors hereby agree, and the Company acknowledges, that the BoS Debt shall rank for all purposes and at all times ahead of the Subordinated Debt”, namely ahead of the sums due under the unsecured loan notes.

[110]The term “Security Period” was, in effect, defined to be the whole period during which anything was owed by SBP to BoS and during that period the Subordinated Creditors bound themselves, with one exception, neither to demand or accept payment in respect of the loan notes. The permitted exception, namely sums which SBP was permitted to pay to the loan note holders, consisted of principal and interest due under the loan notes but only if certain conditions were satisfied. Those conditions include that – clause 6.2.1 – “no Default has occurred and is continuing or would occur as a result of making the proposed payment;”

[111]The term “Default” is unhelpfully defined as being “any Event of Default or Potential Event of Default”. The terms “Event of Default” and “Potential Event of Default” are not defined directly in the Intercreditor Deed but in the Intercreditor Deed there is a definition of “BoS Facility Letter” which refers to a facility letter of the 29th March 2005 under which BoS lent SBP £8,357,000. That facility letter does define “Events of Default” in its Schedule 6 and “Potential Event of Default” in its Schedule 9. It is that character of defaults, say the Defendants, to which 6.2.1 of the Intercreditor Debt refers. Paragraph 17 of Schedule 6 of the facility letter speaks of “Any material litigation… commenced or initiated against” SBP as an event of default. Schedule 9 of the facility letter defines “material litigation” as:

“Any litigation, arbitration or administrative proceedings raised or threatened against or defended by [a number of companies including SBP] which involves (or would involve if an adverse finding were made in respect thereof) a total liability (whether actual or contingent) in excess of £5,000 (disregarding for this purpose any litigation which BoS (acting reasonably) is satisfied is frivolous or vexatious).”

[112]As I shall come on to when I deal with the Loan Notes Action in particular, the Defendants to that action rely upon the provisions agreed with the Bank of Scotland to claim that they are not permitted to make payment under the loan notes. However, on the 22nd November 2006 Messrs Mills & Reeve, acting on behalf of the Bank of Scotland, said:

“We have now completed our investigations into the Material Litigation and reported to the Bank. On the 21st November 2006 the Bank wrote to Mr Alan Deville and [formally] waived the Events of Default which have arisen under the various facility letters between the Bank and the Beadie Group. Accordingly the loan notes may be made as a permitted payment under the Intercreditor Agreement”

. The letter to Mr Deville there referred to does not appear in the chronological bundles; I am not told whether it was disclosed or, if it was not, why it was not.

Mr Deville’s guarantee

[113]Also on the 29th March 2005 Mr Deville, by deed guaranteed, as a primary obligation by way of unconditional and irrevocable guarantee, to the noteholders of the loan notes payment immediately upon demand of any amount payable to the noteholders under the terms of the loan notes and granted an indemnity to noteholders in relation, inter alia, to losses and costs suffered by them arising out of any failure by SBP to discharge the loan notes. The Guarantee also provided for interest at 2% per annum above the Bank of Scotland’s base rate for the time being (accruing daily and compounded quarterly) to be paid by the guarantor when a sum required to be paid thereunder was not. The total of principal (but not interest) recoverable under the Guarantee was limited to £1,000,000. Other Main Action Issues Unexpressed terms of the Joint Venture

Other Main Action Issues

[114]Although it was from the outset contemplated that the raising of such finance as would be needed to develop or otherwise bring to profit the assets of the old RDG in the market would be in the hands of SBP (if only because at the time the Daniels could no longer borrow) there was no obligation put upon SBP to do so. Indeed, if it were not to be an unacceptably bottomless obligation on SBP’s part it would have been far from easy to frame any such obligation, which difficulty no doubt contributed to the fact, as I find it, that no such obligation was agreed. The CJV made a form of provision on the subject but it was not a form which had been agreed in 1995 and, for the reasons I have given, the provisions of the CJV are to be ignored.

[115]There are, though, some terms which can be imported into the Joint Venture by implication. Thus I would accept that there was a duty of good faith between the individual Participators. It is also to be implied, in my view, that no Joint Venture vehicle or individual Participator should place itself or himself in a position in which its or his duties to the other Joint Venturers or Participators would conflict with its or his own interests. Those two implied terms in conjunction would have the effect, in my view, that, in awarding themselves salaries inside Joint Venture companies after the DoD, Participators should award themselves only at rates agreed with or consented to by the Supervisory Board or, if none such was agreed, only what was reasonable in the circumstances. Rates of remuneration of directors at the rates shown in Attachment 2 to the DoD may be taken as agreed rates.

[116]By implication also I would accept that no Joint Venture vehicle or individual Participator was to be entitled to exploit for its or his own benefit (other than such benefit as was to be derived through the mechanism of the Joint Venture) any development or opportunity for development acquired by it or him by reason of its being a Joint Venture vehicle or his being an individual Participator in it.

[117]I have not found evidence to support a finding that individual Participators were obliged not to compete with the Joint Venture. Several members of the Daniels family conducted or intended, as opportunities arose, to conduct, businesses of property development in the area and to do so quite outside the Joint Venture and the same was true of Mr Deville and Mr Lewis. There is nothing to suggest that they were ever called upon to give up or not to embark upon such separate businesses or that they had agreed to do so. Indeed, I doubt whether they would have agreed to do so. I can see that the line between their being disabled under para 116 above but enabled under this para is a fine line to draw but I would think it capable of being drawn on the particular facts of particular instances.

[118]The individual Participators never expressly agreed any provision having the effect that the information or details as to any development opportunity coming the way of the Participator or which the Participator thought or reasonably thought was suitable for exploitation by the Joint Venture or which he could not have reasonably thought not to be so suitable had to be disclosed to all or some of the other Participators. Had that been intended then careful thought would have been needed to be given as to the framing of what was to be taken to be suitable for such exploitation and what was not, especially given that what was suitable or unsuitable could well change over time. No express agreement in the area can be found. But can something similar be implied? In my judgment, it cannot; as I have mentioned, on both the Daniels and the Deville side, there were Participators who all along intended to carry on business as property developers on their own account or, at any rate, on some account other than that of the Joint Venture. If the chief tests for implication are those of business efficacy and necessity, as I take to be the case, I cannot see that such tests are passed. I thus do not hold there to be a duty to disclose of the kind I am considering.

Retainer of Mr Deville

[119]I have much earlier given a judgment striking out Gisby Harrison, the firm, as Defendants to the Main Action but the Claimants make claim against Mr Deville as if he had been retained by one or more of them to act as a solicitor for them on his own account, as if, so to speak, upon a frolic of his own. I do not hold Mr Deville to have accepted instructions to act as a solicitor to the Joint Venture or to any Joint Venture vehicle or for any individual Daniels family member other than, if at all, by way of acceptance of instructions on behalf of Gisby Harrison. At various stages RJD1, Martin and RJD2 in particular may have thought or assumed that Mr Deville was acting for them as a solicitor on a retainer separate from any retainer of his firm and if they did so then Mr Deville did not disabuse them of that view. However, I do not hold that he was aware or ought to have been aware of what the others thought to be the position and I have no ground to criticise him for failing to disabuse them of that view. But this is not to say that I cannot reasonably expect of Mr Deville, as a man qualified as a solicitor and practising as such, including practising in the particular area of property development, that, in his dealings with his co-venturers in areas where legal expertise was relevant, he should exercise that degree of familiarity with the law and with the draftsmanship of appropriate documents and such commercial ethical behaviour which I could expect of any such solicitor.

Loss of Salaries

[120]RJD1, Martin Daniels and RJD2 claim that, in consequence of their exclusion from the Supervisory Board of the DoD, they suffered a loss of an opportunity to earn salaries. I fail to understand this claim; the body of the DoD makes no provision for the payment of salaries to members of its Supervisory Board. True it is that its work-out cashflow contemplated payment of overheads and that directors’ salary were set out within the contemplated overheads but a contemplation in a cashflow is not an obligation and, in any event, the work-out cashflow soon failed. So there is difficulty in showing that a loss of opportunity to earn a salary flows from exclusion from the Supervisory Board. Nothing in the DoD forbids the defined corporate Venture Vehicles from paying salaries either as might have been already agreed or which were later agreed after the DoD. Nothing in the DoD excluded these Claimants from whatever roles in the management of the Venture Vehicles they had at the time of the DoD or acquired after the time of the DoD under the respective constitutions of those Venture Vehicles.

[121]There was, in my judgment, as from May 2003 (the date pleaded) a degree of exclusion by either or both of Mr Deville and Mr Lewis of RJD1, Martin Daniels and RJD2 from that full participation in the affairs of the Supervisory Board of the DoD to which that deed had entitled them and that exclusion has the potentially important effect, which I deal with below, that assets said to have been moved out of the Joint Venture which, in order duly to be moved out of it, required decisions of a full Supervisory Board, did not have that approval or consent and were pro tanto improper. But I do not see the exclusion as having had the only and particular monetary consequence – namely the loss of opportunity to earn salaries - that is claimed in the Claimants’ pleadings.

Fawkon Walk

[122]This is the name given to land and a development project at Hoddesdon. It was not a subject of the Trust Deed supra of 4th September 2002. It was not listed as an “Asset” of any “Participator” in the DoD schedule save as follows: “Woodhall Deepwell Fee Position Fawkon Walk Hoddesdon”.

[123]That entry requires some explanation. When a development opportunity is found by one developer but then, for whatever reason, eventually is passed to another with whom the former is on good terms a “fee position” may arise, sometimes in negotiations as part of the consideration for the passing of the development from one to the other, sometimes voluntarily by the recipient developer who, for whatever reason, may wish to retain the goodwill of the disposing developer. Either way, the recipient developer is often expected to pay a “fee” to the disposing one. The arrangement can be entirely loose – as, for example, under an oral agreement of the so-called gentlemen’s agreement type, dependant wholly upon the recipient developer honouring what is at most only a moral obligation to the disposing developer – or can be fully contractual. Here the initial developer was SBP. The recipient developer was Fawkon Centre Limited, a company outside the Joint Venture but in which, with others, Mr Deville was interested. Here no contract properly-so-called, oral or otherwise, as to the fee is relied upon. If Fawkon Centre Limited were to pay SBP then, by way of that latter company’s receipt, the Joint Venture would be advantaged and the fee would need to be brought into account as an asset of SBP contributing to its Statement of Affairs balance as I have described.

[124]But the Claimants go further. Their case is that Fawkon Walk was always intended to be acquired as a Joint Venture project but that ultimately it was acquired by a subsidiary of SBP, one outside the Joint Venture, and that that had come about because the opportunity to acquire parts of the land involved had earlier been concealed from the Daniels by one or both of Mr Deville and Mr Lewis. It became, say the Claimants, a profitable development of a Deville company whereas it could and should have been such a development for the Joint Venture.

[125]However, RJD1 accepted in his oral evidence that he had been told in April 2001 that Mr Deville was going ahead with the project with other people than the Joint Venturers but that Mr Deville would seek to get a fee for the Joint Venture. On that basis it is hard to understand the plea of concealment. By the date of the DoD – 23rd July 2001 – it was agreed by all signatories to it that Fawkon Walk represented only a “fee position” and the DoD work-out cashflow accordingly made no provision whatsoever for the development costs that would have been borne by a Joint Venture Vehicle had Fawkon Walk been then recognised to be a Joint Venture project. The oral evidence of RJD1 that the entry “Fawkon Walk Hoddesdon” under the title “Woodhall Deepwell Fee Position” in the schedule to the DoD represented that the fee was not payable to the Joint Venture but payable by it is impossible to accept; the “fee” is shown as an asset not as a liability.

[126]An argument was sought to be developed by the Daniels that they had been misled into relinquishing Fawkon Walk as a Joint Venture project by Mr Deville having said to them that it could not be funded. However, there is no pleading to that effect and in any event, as I have held, there was no obligation on SBP to provide funding for any project that might come the way of the Joint Venture, still less for unquantified funding for Joint Venture projects. In the circumstances it does not assist the Claimants to show either that SBP was able to obtain funding at the time for other projects or that no documents indicate that Mr Deville had tried, but had failed, to arrange funding for Fawkon Walk.

[127]The “fee” was paid and the Defendants’ case is that it was paid “in discharge of Joint Venture borrowing”. I take it that it was thus received by SBP and used to pay off that company’s bankers. That was entirely acceptable as between SBP and an outsider such as a bank but SBP’s receipt of the fee, as were all other of its receipts deriving from the Joint Venture, has to be a feature which can play a part in the computation of its Statement of Affairs balance.

[128]No constructive trust arises in relation to Fawkon Walk, which does not fall to be disposed of under the terms of the DoD and no other provision needs to be made in respect of Fawkon Walk nor any other relief granted in respect of it.

Walsworth Road

[129]This, too, is said by the Claimants to be a development opportunity wrongfully taken outside the Joint Venture, in this case taken to a company called Ant Estates Limited (Ant) in which Mr Deville and Mr Lewis were interested as shareholders and directors. Ant was incorporated on the 21st June 2001, just a month before the DoD was entered into. The opportunity to acquire and develop Walsworth Road, it is said, was concealed from the Claimants until after the DoD had been entered into. Certainly there is no mention of it in the schedule to the DoD. The opportunity to acquire, say the Claimants, was in fact not exploited until July 2002, a year after the DoD, and was exploited by way of an acquisition dependant upon loans from SBP and funding by way of an offer of a Nationwide Building Society loan which had been obtained, it is said, by way of a representation to the Building Society that leases of parts of the development would be taken up by Samuel Beadie (Investments) Limited, a Joint Venture company. On that basis, say the Claimants, Walsworth Road was a Joint Venture project which fell to be disposed of under the provisions of the DoD. Ant, say the Claimants, was incorporated as a vehicle for the acquisition of Walsworth Road.

[130]As for that last allegation, there is no evidence that Ant was incorporated with a view to its being a vehicle for the acquisition of Walsworth Road; the fact that after its incorporation it was used as a vehicle for the acquisition of Walsworth Road does not, of itself, prove that that it was incorporated with that in mind. It was not suggested to me that its Memorandum limited its operations to the acquisition and development of Walsworth Road or even that such acquisition and development was mentioned in the Memorandum. There was, moreover, oral and documentary evidence that indicated that Walsworth Road was not even put on the market until after the DoD had been entered into and the Claimants now accept that they can no longer contend that the opportunity to purchase Walsworth Road arose prior to the date of the DoD. That being so, it is hardly probable that Ant was incorporated as a vehicle for an acquisition which, so far as one can tell from the evidence, was not then in any relevant mind, even as a possibility.

[131]However, that Walsworth Road was acquired with the assistance of or in reliance upon Joint Venture funding was persisted in and the funding was pleaded to consist as follows:- “(1) Funded by loans from SB(P) in the sum of at least £240,875; and (2) Obtained by virtue of having an offer of a loan facility secured by way of mortgage from Nationwide Building Society …. which offer was obtained by the First and/Second Defendants representing to Nationwide that certain leases of parts of the Walsworth Road site had been or would be taken by Samuel Beadie (Investments) Limited …. another Joint Venture Vehicle.”

[132]As for the first type of funding alleged, there are plainly difficulties in proving that loans made by SBP as late as July 2002 were of Joint Venture money but, in any event, it is not pleaded that the loans were of such money. The plea is simply that there were loans from SBP. It cannot be the case, certainly not as late as July 2002, that every last halfpenny that lay at the disposal of SBP was, without more, to be taken to be Joint Venture money. Mr Deville said, and I accept, that by this time SBP had its own resources outside the Joint Venture; he added that Walsworth Road was “100% funded by Hbos”. Mr Ullstein argues that Walsworth Road was funded by using Joint Venture assets as collateral for the borrowing which was used for the acquisition of Walsworth Road – cross-collateralisation – but that was never pleaded and hence it would be wrong for me to entertain it. The Claimants’ argument that there had been an intermingling of Joint Venture funds and other funds for the purpose of acquiring and developing Walsworth Road is not made out.

[133]Turning to the second of the two grounds, those involving the Nationwide Building Society, I fail to see how the representation to the Nationwide, whether it was true or false, can lead to a conclusion that Walsworth Road should be treated as a Joint Venture asset. If it was true that leases of parts would be taken by Samuel Beadie (Investments) Limited the representation would only be material to the Claimants’ way of putting the case if Samuel Beadie (Investments) Limited had no independent need for the premises nor any use of them in mind and that by indicating that it would be taking a lease it was deliberately exposing its Joint Venture resources to an unnecessary risk in support of an acquisition the benefit of which was to pass outside the Joint Venture. But nothing of that kind is either pleaded or proved. If, on the other hand, the representation to Nationwide was false then it could be that the Nationwide was misled but, again, it is hard to see how that would have the effect that the acquisition of the Walsworth Road site thereby had to be regarded as a Joint Venture acquisition. To cap it all, the Nationwide offer was not taken up and it is not shown to me that the loan that was eventually taken up –presumably one from Hbos - was procured or facilitated by there having been a mere offer from Nationwide. There is no relief to which the Claimants are entitled in relation to their pleading in respect of Walsworth Road.

Claimants’ Loan Accounts

[134]Under this heading the individual Claimants one to six claim that, by reason of the exclusion of RJD1, Martin Daniels and RJD2 from the Supervisory Board of the DoD, those members of the Supervisory Board had been unable to ensure that the loan accounts set out in Part 3 of the Schedule to the DoD had been paid to the respective individual Claimants to whom they were owed. The only obligation as to repayment of loan accounts in the DoD is set out at clause 3.3.2.2 and clause 5, which payments fall to be made at a relatively late stage in the Joint Venture accounting sequence which I have described. It has not yet been arrived at. In his closing speech Mr Ullstein accepted, rightly in my view, that payment of the Claimants’ loan accounts was a matter to emerge as an obligation only, if at all, in the course of the accounting process which needs to take place but has not yet taken place. There cannot be any award in respect of loan accounts at this point though one may become appropriate later.

Squires Close

[135]Squires Close is a plot of land at Shefford which has the title number at HM Land Registry of BD119979. It is set out in the Schedule to the DoD as being an Asset held through the medium of a Venture Vehicle, Bondor Developments Limited. All individual Participators thus acknowledged that at the time – 23rd July 2001 – all regarded and accepted Squires Close as an Asset of the Joint Venture to be dealt with under the provisions in the DoD as to its controlled realisation by the Supervisory Board and to distribution of its proceeds pursuant to those provisions, which are inconsistent with the legal estate and the beneficial interests being together outside the Venture Vehicles and Participators. However, it next became one of the development projects dealt with in the Trust Deed of 4th September 2002 to which, as I have explained, the members of the DoD Supervisory Board were party. The effect of that Trust Deed was that Pickenham Homes Limited, which had previously held the property, was now to hold it upon trust for SBP absolutely. As I have explained above – see para 95 above – individual Participators are not in a position to complain that they were not party to the September 2002 Trust Deed as they had assigned management of Joint Venture properties to the Supervisory Board and the Supervisory Board was party to this disposition.

[136]On the 8th October 2002 RJD1 and RJD2, as officers of Pickenham Homes Limited, in which the legal title to Squires Close had hitherto rested, transferred the same, presumably at the direction of SBP, to SBP’s subsidiary Samuel Beadie (Investments) Limited (“SBI”). Squires Close, at that point in October 2002, came, as matter of both legal and equitable title, to be vested absolutely and beneficially in the Joint Venture Vehicle, SBI. However, I have no difficulty in regarding something so held as being capable of still being a Joint Venture Asset. Indeed, it is the Defendants’ own case that Squires Close was “brought back as a relevant Asset for the purpose of and subject to the Disposal Programme under the DoD” and also that by the time it was sold it was an asset within the Joint Venture’s Disposal Programme. I accept that. Its proceeds could be and no doubt were used by SBI to pay off bankers but that does not preclude a Joint Venture accounting of the kind I have described in respect of its proceeds of sale as a contributor to SBI’s Statement of Affairs balance, which, if in credit, is to be brought into the Joint Venture pot.

[137]But Squires Close had a tangled history. It is the case of the 1st, 4th and 7th Claimants - RJD1, RJD2 and RJD2’s wife, Rosemarie - that at an earlier stage, back in 1998, Squires Close had been divided into plots which were held by them respectively on trust, as to plots 3 and 5, for the minor children of RJD2 and Rosemarie Daniels. The case of these Claimants continues as follows: on the 17th January 2000 all the plots were, under a trust deed and transfer prepared by Mr Deville as a solicitor, transferred to Pickenham Homes Limited and that thereafter all plots were on 19th January 2000 charged first to Lloyds Bank Limited for purposes not those of the trusts for the minor children but for Joint Venture purposes and then, in December 2000, that Squires Close was used as security to borrow from Fontleigh Homes Limited, again for purposes of the Joint Venture rather than for the purposes of the trust for children. These Claimants say that such dealings were procured by way of Mr Deville saying that the transfer to Pickenham Homes Limited was not a transfer of permanent ownership but merely for the purposes of raising finance, that Squires Close would revert to the trusts for children when the borrowings charged on it were repaid and that, save for its use for raising finance in that way, Squires Close would be wholly outside the Joint Venture.

[138]The difficulty with that is that the DoD, signed by all Participators on 23rd July 2001, clearly describes Squires Close as a Joint Venture Asset. There may have been – there very probably was – serious breach of trust involved in arriving at that position but the notion of a reversion of Squires Close to the trusts for children is inconsistent with the disposal and payment programme later agreed as part of the DoD. I cannot see how the relevant Claimants therefore are in a position to assert as they do. Nor, as I have indicated, do I hold that Mr Deville had accepted any retainer so as to have become under a duty to advise the Claimants as would a solicitor who had been given and had accepted a client’s instructions. Accordingly, as I see it, the only relevant relief in relation to Squires Close is to ensure, if this is necessary, that its proceeds should feature in its vendor’s annual accounts (as presumably is already the case) and, in turn, may thus contribute to a credit balance in the Statement of Affairs type of Joint Venture accounting process which I have earlier described.

Cricketers

[139]This is the name of land to the west of High Street, Arlesey held under title numbers BD118972, BD118973 and BD126003 at HMLR. The legal title to Cricketers was in RJD1; the beneficial title was in the First to Sixth Claimants inclusively and Mr and Mrs Lewis. That was the consequence of a Declaration of Trust of 1st June 1998. Cricketers was expressly excluded from the Assets of the Participators in the Schedule to the DoD. It was, though, dealt with in the Trust Deed of 4th September 2002 which provided that its title and documents were to be held “upon trust for [SBP] (or as it may direct) absolutely”. In turn, SBP directed its transfer to SBI on 8th October 2002.

[140]As I have mentioned, I regard the Schedule to the DoD as a carefully considered list of what was agreed to be in and out of the Joint Venture at the time. On that footing then, as at 23rd July 2001, regardless of its earlier history, all of the Participators, including Mr Deville and Mr and Mrs Lewis, had agreed that Cricketers was not within the Joint Venture. What, then, if anything, does the Trust Deed of 4th September 2002 do to its legal or beneficial ownership? That Trust Deed is expressed to be supplemental to, inter alia, the DoD and the provision in the September 2002 Trust Deed, cited above, that the title and document of Cricketers should be held “upon trust for [SBP] (or as it may direct) absolutely” is expressed to be subject to the terms and provisions of the DoD which, as I say, expressly exclude Cricketers from the list of Joint Venture Assets and which make no other provision as to its ownership, legal or beneficial.

[141]The September 2002 Trust Deed is said to be subject also to the terms and provisions of a Declaration of Trust of 1st June 1998, namely the trust document which conferred beneficial ownership in the first place on RJD1, his wife, Martin, Heather Lewis, RJD2, Nigel Lewis, and the two other daughters, Cheryl and Jennifer, in the respective shares then set out. The September 2002 Trust Deed, if it is to be subject to that Declaration of Trust of 1st June 1998, can hardly be expected to change the 1998 provisions without clear express provision to that end, yet none such is there. Thus, as I read it, the Trust Deed of 4th September 2002 left the beneficial interests in Cricketers where they had been. Another factor that points in that direction is that if Cricketers was to pass beneficially to SBP one would expect some particular provision to be made with respect to sums borrowed directly or indirectly by the “Third Trustees” (the three Daniels individuals and Nigel Lewis) and related to its acquisition or development. To expect those individuals to give up beneficial ownership of Cricketers yet still to be liable in respect of any borrowings related to it would perhaps be extreme and thus tends towards no transfer of beneficial ownership being intended.

[142]In the circumstances I do not see the September 2002 Trust Deed as affecting the beneficial ownership of Cricketers and, if that is so, then neither did the transfer to SBI as SBI was not a bona fide purchaser for value without notice if for no other reason than that it gave no value. Thus SBI held Cricketers on the 1998 beneficial trusts. That is consistent with an earlier dealing when one of the Cricketers plots (BD118973) was sold circa December 1999 the proceeds went only to Daniels family members. A consequence of Cricketers being so held is that the part of the Option Price attributable to Cricketers in an overall £850,000 Option Agreement made with Laings on 13th March 2001 should have been paid to those interested under the provisions of the 1998 Declaration of Trust. Instead SBI used it to pay its own or SBP’s creditors. Equally, when Cricketers was sold its net proceeds should have been paid to those interested under the 1998 Declaration. That will now need to be done and my order should so provide but, given the uncertainty of who, in the global accounting, will be found to owe what to whom, I shall not order immediate payment at this stage.

Elstow

[143]This is the name given to a development project at Elstow, Bedford. There is no pleading as to Elstow in the Claimants’ Re-re-amended Particulars of Claim but it is mentioned in the Claimants’ amended Reply. It is there alleged that Elstow was acquired by a subsidiary of SBP on behalf of the Joint Venture. Elstow is shown in the DoD as an asset of a Joint Venture Vehicle, Bondor Developments Limited. Mr Deville’s written evidence includes an averment that as an asset Elstow was represented by an Option Agreement that had been granted to Bondor in 1998. He accepted that it had initially been within the Joint Venture and was thus listed as such in the DoD but, he claimed, it was lost by effluxion of time and that that loss was reflected in an agreement of the 21st December 2001, signed by RJD1 on behalf of Bondor. That agreement confirmed that the 1998 option was void. The deposit earlier paid by Bondor to the grantor of the option was repaid to it by Elstow Retail Centre Limited (ERC). ERC was a subsidiary of SBP but, said Mr Deville, one which was outside the Joint Venture. ERC on the 1st March 2002 acquired, for a premium of £1,600,000, an agreement for a lease from the grantor of the option, an agreement for a lease which was already foreshadowed in the agreement of the 21st December 2001.

[144]The Daniels’ response is that their understanding was that the movement of the asset to ERC and the acquisition of the agreement for a lease by ERC represented not a taking out from the Joint Venture but rather a movement from one Joint Venture company, Bondor, to another, ERC.

[145]There are difficulties in the way of treating Elstow as taken out of the Joint Venture on or before the 21st December 2001. Elstow, for example, is mentioned under the heading ‘Our Current Debt’ in Mr Deville’s own “Report to Shareholders” of the 31st December 2001, which refers to a debt of £1,600,000 for Elstow and refers in a table to Elstow as a consented development. Mr Lewis in cross-examination accepted that that looked as if Elstow was being treated as part of the work-out of the Joint Venture and I accept that that is what it looks like. That the Daniels thought that Elstow was still within the Joint Venture is supported by Martin Daniels’s agenda for a meeting of the 17th January 2002. A diagram drawn by Mr Deville relating to that meeting seems to show ERC as owning Elstow and as the meeting was a meeting concerned with the Joint Venture it suggests that Elstow was within the Joint Venture, as also does a Lloyds Bank plc cashflow – SBG 2001-2002 - which again suggests that Elstow was regarded as relevant to Joint Venture discussions at the time. Two later cashflows point in much the same direction.

[146]As late as the 24th June 2002, at a meeting described as a meeting of directors at which Mr Deville attended along with RJD1, RJD2, Martin Daniels and Nigel Lewis, there was a discussion as to Elstow in all respects as one might expect if Elstow were still within the Joint Venture. There are other indications collected in Mr Ullstein’s written closing submissions on the subject but the position is unsatisfactory as the assertions about Elstow as a Joint Venture asset did not emerge as a matter of pleading until the Reply; there is no relief claimed as to Elstow as such and accordingly the Defendants’ closing submissions have treated Elstow as a matter as to which no issue has properly been raised. However, as there are Joint Venture accounts and inquiries which I shall order and as it would be wasteful for them not to embrace as many differences as have already emerged, differences as to Elstow should as far as possible be resolved at the same time.

[147]Accordingly in my judgment there should be an inquiry as to Elstow to establish whether, after the 21st December 2001, it should properly be treated in all the relevant surrounding circumstances as or not as a continuing asset of the Joint Venture after 21st December 2001, one subject to the disposal provisions of the DoD. In that inquiry, given that Elstow is shown in the DoD as a Joint Venture asset, the onus is to be on those who say it was not a Joint Venture asset. In that inquiry evidence given before me is to be capable of being relied upon both as evidence-in-chief and as a material for cross-examination. It will be for the parties to produce to the Master suggested directions for how the inquiry is to be conducted, including directions as to evidence and, if necessary, disclosure. If the outcome of the inquiry is that Elstow is or was at the material times a project of the Joint Venture then it will then become necessary to consider how far profit accruing in the development of Elstow, if not spent in paying off the creditors of a Joint Venture Vehicle which held it, will need to be brought into the accounting process which I have earlier described.

Volvo

[148]This is a development project at Ipswich. It is not mentioned in the Claimants’ Re-re-amended Particulars of Claim and, as was the case with Elstow, it emerges only in the Claimants’ Reply. It is listed in the DoD as an asset within the Joint Venture. The Joint Venture Vehicle which held it was Samuel Beadie (Developments) Limited. As was the case with Elstow, the asset that was Volvo was in the first place an option. Unlike the case with Elstow, there is no document signed by all or any of the Daniels members of the Supervisory Board that suggests that it might have been taken out of the Joint Venture but, as with Elstow, the position is very unsatisfactory. No relief is claimed with respect to Volvo yet there has been evidence both ways as to its being in or out of the Joint Venture. I direct that there shall be an inquiry as to whether Volvo did or did not remain an asset within the Joint Venture and was or was not accordingly subject to the provisions of the DoD. The onus is to be upon those who say it became outside the Joint Venture. Draft directions will need to be framed by the parties to be put before the Master and, corresponding to the case with Elstow, if it transpires that Volvo remained inside the Joint Venture then that will need to be taken into account in the global Joint Venture account. Again, evidence given before me can be used in the inquiry and, if appropriate, in the account but, equally, there can be fresh evidence added and, if necessary, fresh disclosure can be required in the course of the inquiry and account.

Gainsborough Retail Park

[149]Gainsborough Retail Park, a subsidiary of SBP, is not mentioned in any way in the Re-re-amended Particulars of Claim but is mentioned in the Claimants’ Reply. All that is said about it there is that it acquired the Volvo site at Ipswich on or about the 29th November 2001. There is reason to think that Gainsborough Retail Park (“GRP”) was incorporated as a subsidiary of SBP before the DoD was entered into. It thus fell into the definition of a Venture Vehicle as defined in the DoD. I have not understood that GRP has, in any way material to the proceedings before me, any role save in connection with the Volvo site and, perhaps also, Elstow. As both of those projects are already the subject of inquiries and, if necessary, accounts, I see no need for further accounts or inquiries in relation to GRP although it is not to be the case that the Volvo or Elstow inquiries or must stop at the gates of GRP.

Interest on Inter-Company Loans

[150]SBP made inter-company loans to several other Joint Venture companies and other Joint Venture companies made loans to each other. Nowhere is there any provision made, so far as I have seen, for interest to be paid as between any inter-company lender and borrower. Mr Knight knew of no document which showed interest to be payable and saw no invoice for interest or any payment of it. I find that SBP and, indeed, all other Joint Venture Vehicles made their respective loans to other Joint Venture Vehicles free of interest. I have already held – see para 43 above – that the declaration of the 12th November 1997 does not prohibit interest-free loans. I need not deal with the provisions in the CJV as to interest as, for the reasons I have given, the CJV is to be disregarded.

Repayment of Scheduled Individual’s Loan Accounts

[151]Here I refer to the loan accounts set out in the Schedule to the DoD. It is the Defendants’ case that the provision in the DoD as to repayment of loans to individual Participators has to be qualified or construed, as far as possible, so as to procure that such repayment is consistent with the general law. I agree. The loan accounts in the Schedule are not separated out into loans to each respective Joint Venture Vehicle by each respective Participator but were, as Mr Ullstein puts it, “global”, adding together, with respect to each Participator, whatever was loaned by him to all Joint Venture Vehicles in aggregate. That, of itself, encourages one to look at loan accounts, as I have mentioned, not in terms of company by company but aggregated together. Then one comes on to the provisions of clause 3.3 of the DoD which imposes not on the directors of each respective Joint Venture Vehicle but on the overarching Supervisory Board the duty of accounting. Again one is looking at the Joint Venture Vehicles as a whole. Nothing, as it seems to me, interferes with the ordinary duties cast upon the respective directors of Joint Venture Vehicles by the general law and nothing, either, interferes with the ordinary wisdom, amongst directors whose respective companies are or may become of dubious solvency, of their ensuring that their creditors are paid rateably and without unfair preference between them. If the sequence of priorities set out in clause 3.3.2 and to which I referred in para 49 above were to be observed even by insolvent Joint Venture Vehicles not as to the pooled aggregate of Statement of Affairs credit balances but to all assets of Venture Vehicles then the provisions of the general law would be offended. If insolvency loomed then nothing, in such a case, would permit or make acceptable that directors should pay, say, bank borrowings ahead of the general body of creditors. One is therefore encouraged to construe the provisions as to repayment of scheduled loan accounts, when the language so permits, so as not to lead to such offence. The construction which I have given to the repayment provisions of the DoD is intended, without, I hope, straining the DoD’s language, to arrive at such a conclusion. The consequence is that no individual Participator can expect repayment of his loan account as scheduled in the DoD until a late stage in the accounting process after ascertainment of the pot and after payment thereout of any “bank borrowings” remaining still unpaid. It may, at an earlier stage, have proved to be foreseeable that there will definitely be a balance repayable under clause 3.3.2.2 but, unless and until that emerges (and I do not understand it has yet emerged) even a provisional payment, on account, would not be right. Accordingly, I do not see any claimant as able to press for immediate payment at this stage.

Shareholdings

[152]Throughout the events I have described the individuals’ respective proportional entitlements from time to time to such of the net profits in aggregate of the Joint Venture Vehicles as might fall for distribution have been described by the parties as “shareholdings” and those so entitled were described as “shareholders”. The use of the term “shareholder” was thus frequently applied to persons who were not registered shareholders of the company in question and the term “shareholding” was misused in like manner. The misuse tended to obscure or conceal the hybrid nature, as I have described it, of the Joint Venture, which was, in my judgment, more than a group of companies, not simply an agreement between themselves by shareholders properly so-called and not merely a Partnership Act partnership between individuals or between individuals and companies. It was a Joint Venture in which individuals who included those beneficially interested in the shares of Joint Venture Vehicles agreed between themselves that, whilst every separate Joint Venture Vehicle could be left, during the currency of the Joint Venture, to be run, within broad parameters, according to its own respective constitution, the distributable ultimate profits of each separate Joint Venture corporate vehicle (if any), both before the end of the Joint Venture and after it had been brought to an end by the DoD, would be pooled and dealt with, as from the date of the DoD, as that deed provided. Thus any balance remaining after the sequence of priorities provided for in its clause 3.3.2 of the DoD would ultimately be paid to Participators, the individuals, in the respective proportions (albeit called “shares”) which are set out in Part 4 of the Schedule to the DoD unless there shall have been clear agreement, after the DoD, to the contrary.

[153]It would, I apprehend, have been open to the Participators, before the DoD, to agree distribution in other ways but, once the DoD was made, such distributions could only be made under its provisions. That being so, I do not find it necessary to inquire into what were the proportionate ownerships or entitlements inter se of Participators at stages earlier than the 23rd July 2001.

A Funding Obligation on SBP?

[154]I have already indicated – see para 114 above – that there was no obligation put upon SBP to fund the Joint Venture. I arrived at that conclusion by reference to the documents in the case but typical of the difficulties in the evidence in this case was the evidence given on the subject by RJD1. He said that SBP took on an obligation to provide funding to buy out assets from the “old RDG” and also to continue to fund the Joint Venture. He said:

“You won’t see it in any document. It is what is called the unwritten word. It was an understanding”

. He was asked which words were spoken by Mr Deville or Mr Lewis (the directors of SBP) or by him, RJD1, to reflect that understanding or agreement at the outset of the Joint Venture. His answer was:- “No words were spoken. It was the understanding. It was the agreement.” Later he said:

“No one said a word”

. And still later he added: “I don’t remember the actual words”.

[155]How such an important obligation could be called into existence without being found in any document and without any word or any remembered word being spoken on the subject defies sense. I mention this as an example of how evidence given with complete conviction by an experienced businessman can nonetheless be completely unreliable. RJD1’s oral evidence on the subject could not form the basis of a finding that SBP was under an obligation, either at the outsetor at all, to fund the Joint Venture. Mr Tager’s written closing submissions include a collection of references to the oral evidence of Martin Daniels and RJD2 on the subject. It is quite impossible to conclude that any oral evidence fills the void on the subject that emerges from the written documents.

Transfers out of the Joint Venture after the DoD

[156]The only consequence of the Daniels’ alleged exclusion from the DoD Supervisory Board pleaded in the Re-re-amended Particulars of Claim is loss by the identified Claimants of an opportunity to earn a salary, a topic which I dealt with in para 120 above. In argument, though, it has been said from time to time by Mr Ullstein that this or that asset of the Joint Venture (as listed in the DoD) should not be treated as having been properly moved out of the Joint Venture unless there had been prior authority for the move by the Supervisory Board. There is force in that, but Mr Tager rightly points out that there is no pleaded claim by the individual claimants that any actions taken by the Defendants in relation to the assets of the Joint Venture should not have been taken because they had not been authorised by the Supervisory Board. A claim that a particular transfer out of the Joint Venture had not been authorised by the Supervisory Board is the sort of allegation that would, in order to be made at all, have needed to have been made with full particulars. It was not so made in respect of Elstow and Volvo. I thus do not see that it would be right for the Court to investigate at this stage whether any other particular transfer out of the Joint Venture had been so authorised. But that is not to say that, now the point has been raised, that when the subject emerges, as it is likely to do, in the course of the inquiries and accounts which I shall direct, that it should not be dealt with then.

[157]I have heard evidence about Mr Deville’s attitude to the Supervisory Board. Thus, only shortly before the DoD was entered into and dated on the 23rd July 2001, there was, on the 20th July, a meeting attended by Mr Deville, Mr Lewis, Heather Lewis and David Knight. The Daniels side, it will be seen, was not represented. The note of the meeting, so Mr Tager was instructed, was made by Mrs Lewis. She herself could not remember whose note it was but in cross-examination did not suggest that the note was inaccurate. Her husband said that he would have seen the note in draft and he thought it was accurate. Paragraph 6 said:

“It was made clear by ACD that the Supervisory Board will have no real say in the on-going management and trade-out of the Group. In fact, ACD effectively controls SB and NL has control of the Romford project. DK [Mr Knight] will be part of the Board.”

In context, the “SB” there referred to was “Samuel Beadie”, meaning the SBG or SBP in particular.

[158]It was put to Mr Deville in cross-examination that he thus never intended that the Supervisory Board would have the supervision which, a few days later, the DoD appeared to confer upon it. He denied that the note recorded what he had said. There was, he said, a clear understanding that management would be with SBP. I do not accept Mr Deville’s evidence; in my judgment the note records what he did say at that meeting on the 20th July 2001. I have no good reason to think the note inaccurate. Nor is there any evidence that supports Mr Deville’s view that there had been a clear understanding that management would be with SBP. In my view the paragraph records what was Mr Deville’s view at the time, namely that the Supervisory Board would “have no real say in the ongoing management and trade-out” of the Joint Venture Vehicles.

[159]In his closing speech Mr Tager asked me not to make any findings on the subject of the exclusion of the Daniels from the Supervisory Board beyond those necessary to deal with the pleaded claim. I have already dealt with the pleaded claim in relation to exclusion. But Mr Tager at the same time did accept that there had been an exclusion of a kind; Mr Deville and Mr Lewis, he accepted, had made it clear that the previous method of government with five of them - the three Daniels and Mr Deville and Mr Lewis – sitting down together and making decisions was not applicable. There was an exclusion, he said, which was a continuing contractual breach but not one accepted as a repudiation.

[160]The question then arose how far, if at all, the Daniels’ members of the Supervisory Board had so acquiesced in exclusion as no longer to be able to complain of it. From May 2003 there had been other litigation of one kind or another between Daniels on the one side and Deville or Lewis on the other. Meetings could well have been so uncomfortable as to be wished to be avoided. On the 26th April 2004 RJD1 is found writing to Mr Lewis asking for information about particular Joint Venture projects on the ground that Mr Deville was refusing to speak to him. The level of co-operation that was then existing between the parties is reflected by the answer to RJD1 not coming from his son-in-law but, on the 30th July 2004, from Messrs Gisby Harrison, who refused information on the footing that the Joint Venture was dissolved and who invited RJD1 not further to write to Mr Lewis. Mr Sibley, solicitor acting for the Daniels, also put a block on meetings. Moreover all evidence from RJD1, Martin and RJD2 as to their exclusion was free of chapter and verse and was little, if anything, more than a bald assertion of exclusion. They were weak, too, in explaining away their lack of complaint on the subject.

[161]But the whole subject of exclusion from the Supervisory Board, save to the limited extent that it is necessary to look at it in relation to the claim for loss of opportunity to earn salary, would have required far more detailed evidence and a more explicit pleading to make a sound claim for exclusion and to make a defence to acquiescence in it than is to be found in the pleadings in the actions before me. To that extent I accept Mr Tager’s invitation not to go further into the subject than is strictly necessary on the present pleadings.

[162]But, unless and until a position is arrived at in which the Daniels members of the Supervisory Board cannot be heard to complain of their exclusion from it, a position not shown to me to have been reached, it does seem to me right that any account or inquiry which is taken or made in consequence of this judgment should start from a position in which the onus of proof, in relation to any transaction which, on the face of things, should have had the consent of the Supervisory Board, should be on he or they who say that such consent was either given or, alternatively, was, in all the circumstances, unnecessary.

Forged Notes

[163]There are very many meetings attended by Martin Daniels where the only purported record of what was said is a note composed by him. His practice was to make scribbles during the meeting and then only shortly thereafter to compose a full note in his own handwriting. He said in oral evidence that he used a lot of pencil but, without any particular original being produced to him (and none was, though I was told that the originals were in court) he could not say whether pen had been used instead of pencil in particular cases. He said that he had supplied the originals – everything he had left – to his solicitors. It was the Defendants’ case that in some instances the note had been forged. It was not meant by that that the notes produced were not Martin’s work or not wholly in his hand. Instead it was suggested that in some parts the notes produced as if true and roughly contemporary records were not such but rather that Martin had later either deliberately recomposed whole pages to replace them with pages, parts at least of which were not accurate but which were then produced as if they had been a true contemporary note, or that he had deleted parts of some pages and, in the gap so created, had later deliberately refilled the gap with fresh passages which he knew to be false and yet which, again, he had produced as if a contemporary record.

[164]That a note was not an accurate record of what was said (itself not easy to prove) would not, of course, prove forgery; the writer could have misheard or misunderstood what was said or may have deliberately written a false note at the time. Given that I cannot regard the evidence of RJD1, Martin or RJD2 on the one side or Mr Deville’s evidence on the other as reliable, I would ordinarily here have needed to lean in part on textual analysis (for example, for obvious anachronisms) and perhaps heavily also on professional forensic evidence as to handwriting, paper, pencil and ink analyses. Remarkably, there is no forensic evidence from either side.

[165]The Defendants’ explanation for its absence, based only on instructions to Counsel rather than on evidence, was that such forensic evidence could not help. But if a whole page is later rewritten then, as it seems to me, there may be a detectable difference as to the handwriting, paper, ink or pencil between that whole page and its alleged contemporaries. If, though, parts of a page are deleted, a deletion may, one might think, leave some trace, as might also what had originally been there, and, again, there may be detectable differences as to handwriting, pencil or ink between the altered passage and its neighbours. It is not for me to say that forensic evidence would have helped; all I say is that I would need evidence before I could reliably conclude that it could not and I regard it as little short of irresponsible on the Defendants’ part to make the serious allegations which they do without at least producing expert evidence that forensic examination would have been pointless.

[166]The Claimants’ explanation for there being no forensic evidence from them is that it was for the Defendants to make their case on forensic evidence and that, as the Defendants never did, there was no need for the Claimants to meet it. That, though not irresponsible, is at least short sighted.

[167]In the course of the hearing it emerged that it was not even clear in some cases precisely what pages or what passages were said by Mr Deville to be forged in the sense which I have explained. Nor did textual analysis provide any indisputable guidance. I am not convinced that I need to make findings as to forgery but were I to do so then, given the evidential weaknesses to which I have referred, I could only have dismissed the claims on the basis that the Defendants had failed to satisfy the onus which, as to such allegations, was plainly upon them.

An Account

[168]The examination so far of the leading documents in the four actions and of some identified separate topics within the pleadings, coupled with such observations as I have already made as to individuals’ evidence, lead me to conclude that it would be right for me to order inquiries and accounts in relation to the affairs of the Joint Venture. Some such relief is sought in paragraph (g) of the Prayer to the Claimants’ Re-re-amended Particulars of Claim in the Main Action. Whilst the Defendants to the Main Action deny the Claimants’ entitlement to any such account, they at least foresee one as not being wholly unlikely – para 158 of the Re-amended Defence of the remaining Defendants. SBP, as I have mentioned, also seek accounts in the Counterclaim in the Receivership Action.

[169]An account is desirable as there are as yet irreconcilable differences, not just in the Main Action but in the others too, as to who owes what to whom and, in the circumstances of this case, there is no likely and adequate resolution of such differences otherwise than by the taking of an account, a procedure entirely appropriate as between persons who have conducted affairs between them by way of a Joint Venture based, at any rate initially, upon trust between them.

[170]Mr Lewis in his oral evidence indicated that he would wish to see an account being made (he was not necessarily referring to a formal account taken in court) at the end of the Joint Venture. Mr Knight’s oral evidence also supported that that had been intended by at least the main parties to the Joint Venture. Mr Knight spoke, for example, of inter-company loans, which were not at interest, being intended to be included in a final account; that a recurring theme with the auditors was that allocations would be made at a later date; that loans would be sorted out in a final accounting and that there was recognised, in the Joint Venture’s bookkeeping as it moved forward, that there would be a future account in which, for example, sums drawn down by individuals as “on account” would be brought in.

[171]The taking of the accounts and inquiries which I have in mind will be an expensive and time-consuming process (unless the shortcut I tentatively suggest below is adopted) but I have several times warned the parties in the course of the hearing that that would be so were I to have to order one but they pressed on undeterred. However, it is incumbent upon me to provide indications as to the form and content of the accounts and inquiries (for convenience I shall just refer to accounts) which I see as appropriate and they are as follows:-(i) The broad intent of the account will be to establish what should be taken to be the distributable assets of the Joint Venture – what I have called the pot. Distributable assets are those which would be available for distribution(in specie or as money) to their respective shareholders if each separate Venture Vehicle had its net assets laid out as one would expect in a Statement of Affairs in a winding up (whether or not a winding up is in being) and the credit balances were then pooled.

(ii) In that exercise the CJV is to be ignored.

(iii) The SPA has no effect on the account save, if it is material at all, to the extent that it compromised all claims of the kind referred to in paras 105 and 106 above.

(iv) Save where all parties agree on an inclusion of a vehicle otherwise outside the next description as a Joint Venture Vehicle, the corporate vehicles part of and used in or by the Joint Venture are to be taken to be only those that are identified in Part 2 of the Schedule to the DoD (including companies there referred to as subsidiaries of another).

(v) There is no end date of the account other than the date when it is taken.

(vi) The starting assets of the Joint Venture are to be taken to be only the lands and opportunities set out in Part 1 of the Schedule to the DoD. As the same have, over time, been sold or otherwise turned to profit after the DoD then the proceeds of that sale or dealing and the assets for the time being representing the same shall be the assets for the time being of the respective relevant Joint Venture Vehicles and thus capable, if not already spent, of being distributable assets falling into the pot.

(vii) In so far as any distributable assets have not yet been sold or dealt with but are thus held in specie, then the Supervisory Board of the DoD, unless it takes the view that the same are worthless, shall arrange for their realisation or valuation as soon as practicable. It is for the Supervisory Board of the DoD to choose whether to sell or evaluate. The proceeds of any such realisation or the value, as appropriate, shall be included in the pot. All Participators and companies in which they are interested are to be at liberty to bid or offer for the same. When the Supervisory Board chooses valuation rather than realisation an expert valuer independent of all Participators shall be used, at the expense of the particular Vehicle concerned.

(viii) No asset within Part 1 of the Schedule to the DoD shall be treated as having been duly passed out of the Joint Venture for no consideration in money or money’s worth unless the dealing alleged to have had that effect was either resolved upon, consented to or knowingly acquiesced in by the DoD’s Supervisory Board. Mr Lewis gave evidence, which I accept, that he was excluded from that Supervisory Board. Moreover – see para 157 above – I have already referred to Mr Deville being recorded in a note of the meeting of the 20th July 2001 made by Heather Lewis, the accuracy of which I have accepted, as intending that the Supervisory Board would have no real say. I hold that to have been an intent of Mr Deville that was achieved in practice. Thus the onus of proving the consent of the Supervisory Board, or acquiescence in dealings effected without it, is to be on he who so alleges.

(ix) Where it is alleged that after the DoD an asset has passed out of the Joint Venture to a Participator or a company in which a Participator is interested without that having been done by way of a dealing for full and valuable consideration in money or money’s worth then the onus of so proving the inadequacy of the consideration shall be upon he who alleges that to be the case.

(x) It may thus appear that some assets or proceeds or a sum representing the extent by which an asset was too cheaply passed out of the Joint Venture will require to be brought back into the Joint Venture and will then need to be dealt with as in paras 55 et seq above. Either way the value will be capable of being a distributable asset but only after due allowance, in an appropriate case, for such expenditure laid out by the Participator or his company as shall have added to the value of the asset, to the extent of the value added.

(xi) Ordinary overheads of the Joint Venture Vehicles incurred or paid before the 23rd July 2001, the date of the DoD, and in particular salaries and directors’ fees, are to be treated as having been properly incurred and paid. Ordinary overheads incurred or paid on or after the 24th July 2001 are to be treated in the account as properly incurred and paid if they are of the description of those in Annexure 2 of the DoD (albeit relating to any period after as well as during the 6 months to which that Annexure related) and are at rates reasonably comparable (taking into account price and cost increases) to those in the Annexure. However, any excess paid to a Participator or to a company associated with a Participator is to be paid by him to the payor vehicle as a contribution to its Statement of Affairs.

(xii) The entries in the annual accounts of any of the Joint Venture Vehicles which show inter-company loans to or from any other of such vehicles are (with the exception I shall mention) to be treated as relevant assets and debts respectively of the vehicles as so shown. As I have mentioned, I do not accept the Claimants’ case that some or all of such inter-company loans were what they described as “subvention payments”, advances never intended or required to be repaid. I accept Mr Lewis’s evidence that where they were so shown in annual accounts they were real inter-company loans and also his evidence that Martin Daniels, who, more than anyone else on the Daniels’ side, was responsible for accounting, had never indicated that they were other than real inter-company loans. I accept also Mr Knight’s evidence of there having been substantial inter-company lending which was not at interest and which was recorded both in the books of the Beadie Group and of the Daniels Group as showing respective loans and debts and that all were intended to be included in a final accounting.

(xiii) Each corporate vehicle is to be treated for the purpose of this exercise as if it discharges, so far as it can, all its creditors, including its paying off (and receiving) its inter-company loans, those from and to other venture vehicles. The intent is that a Statement of Affairs-type of creditor or debit balance will emerge for each separate vehicle. Where there is a credit balance, rather than its becoming applicable to the shareholders in the company concerned it is to be pooled with other creditor balances and then applied as I have described above.

(xiv) Where, since 23rd July 2001, any Participator or Venture Vehicle has received “on account” a sum taken to be distributable profits, he or it shall normally – see para 57 above – be required to pay that sum to the vehicle whence it came (to be a component in that vehicle’s Statement of Affairs type of account) or, if the particular vehicle cannot be identified, into the pot.

(xv) Nothing in this accounting is to suggest or require that any vehicle or individual need not pay its or his bankers or other creditors in the due course of payment; the accounting is an exercise to arrive at balances as they would be had the terms, as I have found them to be, of the DoD’s accounting been followed. Credits thrown up by the account may confer rights upon one Joint Venture Vehicle or Participator against another or others but cannot detrimentally affect those wholly outside the joint venture. (xvi) Where a company – and SBP would be the prime example – borrowed both for purposes inside and outside the Joint Venture it will be necessary to identify which borrowings were for Joint Venture purposes and which were not in order, in turn, to establish whether the borrowing was a “bank borrowing” for the purposes of the DoD or not. I do not see it as appropriate to impose either a general onus of proof or some rule of thumb to assist in finding the extent to which any such borrowing was for one or more joint venture purposes or for outside purposes; the same is to be established by the application of the balance of probabilities to the contemporary documents and the evidence given on the taking of the account.

[172]As I have mentioned, this accounting process will be expensive and time-consuming. There may be a shortcut but it is one which I have no power to order but which I tentatively suggest for consideration by the parties. Mr Knight is already well familiar with the affairs of the Joint Venture and he is an accountant. He gave oral evidence in a careful and non-partisan way. It may be that he could be persuaded to draw up an account which falls as nearly as may be within the indications which I have described. I have no doubt about his competence to conduct a fair account and inquiry. He would, I do not doubt, require remuneration and would be entitled to it. I would not suppose that any provision for his remuneration would be acceptable to him and to the parties other than that it should be equally borne by the Daniels’ side and the Deville side. But it would be pointless if the account conducted by him was not agreed from the outset to be binding on all parties; the parties could agree to terms such as those used in binding arbitrations. As the shortcut might be taken I shall delay the commencement of the accounting process I have described by two months and in that time, at any rate unless it soon emerges that the shortcut is likely to be taken, the parties can start framing the directions which they will ask the Master to give at the first hearing in relation to the accounts. I direct that it shall be for the Claimants first to frame draft suggested directions to be made by the Master and for them to serve the same not later than the 15th October 2008. The Defendants should then suggest any amendments which they would seek within six weeks thereafter, with the Claimants at liberty to reply by 17th December, and there is to be an appointment to be taken before the Master not before the 12th January 2009.

The Loan Notes Action

[173]On the face of things SBP owes £2,275,000 on its Loan Notes. The creditors are the individual Daniels holders of the Loan Notes. Payment was demanded from SBP on the 15th May 2006 and on the 5th October 2007 was demanded from Mr Deville under his guarantee. I shall deal with SBP’s defences first.

[1]The consideration payable is an asset of the Joint Venture.

[174]That, even if true, would not excuse non-payment; it would merely justify a request or demand upon the recipients that they should bring their respective receipts into the Joint Venture account. But was it true? The documentation is entirely silent on the point. If it had been intended that the fruit of the Loan Notes should be treated as a Joint Venture asset to be brought into a Joint Venture account one would expect to find some record of discussions on the point. Every member of the Supervisory Board was a party to the SPA and consequently it cannot be said that the disposition did not have the consent of the Supervisory Board. There is no contemporary document that requires that any part of the fruits of the Loan Notes should be brought to account. Nor is there anything that suggests that any part of the £225,000 paid as an initial payment was demanded by SBP to be paid to it or otherwise was to be brought into account as a Joint Venture asset or a proportion of a Joint Venture asset. There is nothing in Mr Deville’s guarantee that reduces his potential liability to take into account that, were any part of the consideration for the shares to be treated as a Joint Venture asset, part of it would or might be payable to himself ultimately and hence would not or might not need to be guaranteed. No one at the time behaved as if either the initial payment or the fruits of the Loan Notes had to be brought into some form of account as Joint Venture assets. One might have expected, for example, that the form of account would have been specified if only for the sake of clarity; none ever was. Nor is it the case that the point was simply overlooked. In an earlier draft of the SPA there had been a clause that provided as follows:- “8.3.2. That the sale of the shares to the Vendor [sic] pursuant to this Agreement shall constitute a disposal of an Asset for the purposes of the Deed of Dissolution”.

[175]Mr Deville’s oral evidence was that he agreed to that being deleted. He said he had no commercial choice other than to agree. There is no evidence on which I can hold that a consequence of the SPA was that the initial payment and the Loan Note payments or any part of either was to be treated as a receipt attributable to a disposal of a Joint Venture asset or otherwise to be fruits of which had to be brought into some account; in my judgment both the initial payment and the Loan Notes were intended to belong beneficially and absolutely to the Vendors of the shares in the proportions set out in the instrument.

[2]The terms of the Intercreditor Deed

[176]Here the Defendants’ case is this; there has been an event of default within the provisions of the Intercreditor Deed - see para 111 above. Accordingly SBP is not permitted to pay the sums due under the Loan Notes, nor can the Claimants demand their payment. The event of default is said to be the issue of the Receivership Action on the 8th January 2007, the costs of which represent a potential liability, at least as to costs, in excess of £5,000. The earlier letter on behalf of the Bank of Scotland of the 22nd November 2006 – see para 112 above – so say the Defendants, did not purport to and could not waive future events of default such as arose upon the issue of the Receivership Action. It matters not that the Bank of Scotland has not declared the launching of the Receivership Action to be an event of default and so it is open to SBP, it says, to rely upon the terms of the Intercreditor Deed to deny payment to the Claimants.

[177]This defence thus relies upon an event of default but not as defined in the Intercreditor Deed (to which the Loan Note creditors were parties) but as defined in a separate instrument – the facility letter of the 29th March 2005 to which neither they nor SBP was party. I remain to be convinced that it is possible to read that definition into the Intercreditor Deed but, even if that were to be possible, Mr Ullstein argues that once the Bank of Scotland had waived such default as existed as at the 22nd November 2006 the Loan Notes became immediately payable in the sense that the Loan Note creditors could then require their payment at a point at which SBP had no grounds of default on which it could rely to deny payment. It cannot matter, he argues, that thereafter, a fresh default arises (even if one did, which was denied). Otherwise, he could add, one would encounter the absurdity that the launch of proceedings against SBP for payment of Loan Notes which had become payable could itself be a ground on which SBP could resist payment. It would undoubtedly have been prudent on the Claimants’ part to obtain a further waiver from the Bank of Scotland but, even without it, I remain unconvinced that there is shown to be a relevant “default” for the purposes of the Intercreditor Deed on which the Defendants can rely.

Illegality

[178]Shortly before the SPA was entered into on the 29th March 2005 the company whose shares were being bought, Pickenham Estates Limited, sold all its shares in its wholly owned subsidiary Pickenham Homes Limited. They were sold to RJD1 for £2. That, say the Defendants, represented financial assistance, made unlawful under the provisions of section 151 of the Companies Act 1985. In effect, I think it is said, financial assistance was given by way of RJD1 being enabled to acquire for £2 an asset of Pickenham Estates Limited which was worth far more, thus, in a transaction closely related to the sale and purchase of the Pickenham Estates’ shares, RJD1 was enabled to require only a lower price from the purchaser of the Pickenham Estates’ shares, namely SBP, a price lower than would otherwise have been the case. To that extent Pickenham Estates Limited assisted SBP’s purchase of the Pickenham Estates’ shares.

[179]At the time of the transaction Pickenham Homes’ balance sheet had disclosed total assets of £491,907 but liabilities of £682,675 and accordingly net liabilities greater than the £189,953 disclosed in that balance sheet. It is accepted by the Defendants that a consideration of £2 would have been justified if the assets and liabilities of Pickenham Homes were truly represented by such accounts. However, say the Defendants, if the Claimants’ “subvention” arguments were to succeed, so that inter-company transactions, despite being recorded in accounts and audited accounts, were truly gifts and hence not repayable, both the assets’ and liabilities’ sides of the Pickenham Homes’ accounts would have been transformed in such a way that the £2 purchase price for Pickenham Homes would have been truly massively advantageous to RJD1, with the consequence of financial assistance having been given as I have mentioned. However, this whole argument is accepted by the Defendants to rest upon the Claimants’ subvention argument succeeding. If the subvention argument fails so does the illegality argument. I have held the subvention argument to fail and accordingly need not look further into this alleged illegality.

The CJV Fraud

[180]Clause 12 and 24 of the SPA amount, say Mr Deville and SBP, as counterclaiming Defendants, to a representation given to SBP (by way of Mr Deville) by, inter alios, RJD1 and Martin Daniels. The representation was that the CJV was a contractually binding document as far as they were concerned. SBP relied upon that representation, it is said, and it procured the entry of SBP into the SPA on the terms of that instrument. That misrepresentation is said to be fraudulent, at least so far as concerns RJD1 and Martin Daniels. Thereby, said the counterclaimants, SBP bought for £2,500,000 a company worth greatly less. I have had no evidence as to the value of the shares sold by the SPA. This alleged fraud wholly depends, as I understand it, upon clause 12 and 24 amounting to a representation that the CJV did bind the alleged fraudsters contractually at the date of the SPA. But – see paras 101-105 above – I do not read either or both of clauses 12 and 24 as having had that effect.

[181]In any event I am far from convinced that SBP relied upon the clauses as is suggested. At the time of the SPA Mr Deville was very keen to get hold of a development at Romford, partly to develop it and partly to use the property involved in it as collateral for other developments. He asserts that he was under great commercial pressure to clinch the SPA as without it SBP was in imminent danger of hostile action against it by the banks from whom it had borrowed. I doubt that the contractual nature or quality of the CJV was in anyone’s mind at the date of the SPA and Mr Deville’s assertion that because of the fraudulent representation, as it was alleged to be, he took no steps to procure that the individual Claimants should sign a deed confirming that they accepted the CJV as binding on them is implausible. Any solicitor who had given any thought at all to the contractual force or otherwise of the CJV or as to reliance upon it, seeing it described as an instrument of 1996 (and thus, on the face of things, made long before the DoD that brought the Joint Venture to an end)} would have asked for a confirmatory deed whether the representation alleged had been made or not. I do not find this alleged fraud proved.

The Joint Venture Debts Fraud

[182]This form of claim and set-off, like that under the “illegality”, depends upon the Claimants succeeding in their subvention argument. As they do not, this defence falls for that reason.

The Joint Venture Misappropriation

[183]It is the Defendants’ case that SBP put very large sums into RDG companies, that such companies also received considerable amounts for the disposal of their assets but that if, from such aggregate receipts, sums properly paid out of the RDG companies for acceptable Joint Venture purposes (including repayment of SBP) are subtracted there still remains a very large sum – the Defendants say almost £8,300,000 – unaccounted for. I cannot accept the Claimants’ response that there is no evidence at all in support of this counterclaim (which is not asserted against the Fifth and Sixth Claimants); Mr Deville’s first supplementary witness statement attempted to grapple with the figures but his computation does depend upon the concept of “DPE” – development project expenditure – a concept defined at length and provided for in and only in the CJV. It is not referred to in the DoD. If the CJV cannot be relied upon, as in my judgment it cannot, then Mr Deville’s computation will not be correct and different tests will be applicable to determine what is and what is not expenditure that can properly be laid at the Joint Venture’s door.

[184]I am far from saying that no sum will ultimately be found to have been due from RDG companies or from Daniels’ directors on such accounting but I cannot say at this stage that the figure will be about £8,300,000. The existence of this counterclaim to the apparent loan note indebtedness is another reason for the global accounting that I have indicated as being appropriate. If the accounts and inquiries which I have described are not all-embracing then either during such accounts and inquiries or after them, given the hostility between and the obduracy of these parties, there would be likely, subject only to limitation arguments where appropriate, to be even further proceedings claiming yet further debts and credits. It will thus behove the parties to bring forward all their respective claims to be dealt with uno flatu in the directions which they will suggest to the learned Master.

The Hitchin Misappropriation

[185]The set-off based on this allegation was abandoned by the Defendants as was made clear in Mr Tager’s closing submissions.

Personal Loans to Claimants

[186]The Claimants deny that the so-called loans were made. This, unfortunately, is yet another area in which it is not possible to be conclusive at this stage. It is SBP’s case that, in proportions as between the Claimants as are set out in its counterclaim, some £479,430 were lent by SBP to individual Claimants. I do not accept the Claimants’ first response that the payments, if made at all, were “subvention payments” or, in effect, gifts. However, it is unclear how far, if at all, in respect of any loans made and proven to be made before the 23rd July 2001, the date of the DoD, SBP’s pleaded computation was overtaken by the respective loan account credit balances in Part 3 of the Schedule to the DoD which I take to have been intended to be and to be a definitive netting-off at that time. As for loans alleged to be made after the 23rd July 2001, as to one category thereof it is at least arguable that SBP lost any right of recovery as Mr Deville, on the 4th February 2003, wrote that SBP would not under any circumstances seek to pursue such debts. I do not say that there is plainly no counterclaim here and hence no set-off as against the loan notes but I cannot say at present what it would be for. The accounts and inquiries that I have spoken of will need to embrace this area too.

Rent Arrears

[187]On 20th February 1998 SBP, as landlord, entered into a lease, with Newton Byre Limited as tenant, of premises at Grange House, 70 High Street, Stotfold. The term was for 20 years from 25th December 1997. The rent was to be payable only from the 20th February 1998. The initial rent was £20,000 per annum. There were provisions for review but I am not told that they were ever implemented. The lease was terminated on the 25th May 2003. No rent has ever been paid. The Defendants raise no claim here against the tenant, Newton Byre Limited, but do raise a counterclaim against three of the four guarantors, namely RJD1, RJD2 and Martin Daniels. The fourth guarantor was Nigel Lewis. The guarantors’ covenants were in ordinary form and, on the face of things, a claim against them for the unpaid rent is irresistible. Thus the guarantors appear to owe £107,500. The lease contains no provision for a liability of the guarantors for interest on unpaid rents.

[188]The Claimants’ case is that it was never intended that the lease should create a binding obligation on Newton Byre to pay the rent apparently reserved or, indeed, any rent. The lease, they say, was entered into solely for funding purposes. By that what is meant is that it was created to impress prospective or actual lenders to SBP but without creating a true obligation on the part of the tenant. It was, in other words, if that is true, another instrument intended to deceive. However, in marked distinction to the case in relation to the CJV, there is not here any reliance upon anything said to the Claimants by Mr Deville or upon any conduct of his or of anyone else at or about the time of the entry into the lease that clearly represented to the Claimants such that they thereby understood that Newton Byre would never have to pay rent or that they as guarantors would never be called upon to pay it either. The Claimants’ case as finally put relies entirely on inferences said properly to be drawn from Mr Deville’s conduct before and after the entry into the lease. Every reference to the evidence on the subject which is relied upon in the Claimants’ closing submissions is a reference not to something understood by or said to any Claimant but to conduct of Mr Deville in relation to other persons. None of those references, separately or together, amount in my judgment to a representation either to Newton Byre or to any guarantor that rent need not be paid or that it would never be demanded or that the guarantors would be free of liability on such a score.

[189]Nor do I regard the fact that the rent was never demanded or paid in the interim between the creation of the lease and its termination as of itself indicating that rent need not be paid and that the guarantors were free; it is not at all improbable that had SBP demanded rent from Newton Byre the most likely commercial effect would be that SBP would have had to lend more to Newton Byre in order that the rent should be paid. The lease was stamped; it is in a very full 49-page form and was signed by the guarantors as a deed. Limitation is not available as a defence given a ruling that I gave on the morning of the 48th day of the hearing. Overall there seems as yet no answer to a counterclaim for £107,500. However, as I shall mention, this does not mean to say that it is immediately to be paid.

Mr Deville’s Position as Guarantor of the Loan Note Liability

[190]I have not understood Mr Deville to raise, as a defence to his liability under his guarantee of the Loan Notes, any defence other than ones which are mirror images of the ones I have already dealt with as defences in connection with SBP. Consistently with my approach to those, there is to be a reduction of £107,500 in SBP’s Loan Note liability under the heading ‘Rent Arrears’, there may under the heading ‘The Joint Venture Misappropriation’ be a heavy reduction, even annihilation, of SBP’s Loan Note liability on that score and a further one under the heading ‘Personal Loan to Clients’. Thus, I cannot think it just to require that Mr Deville as guarantor should as such be required to pay any sum here and now to anyone who is subject to the Joint Venture Misappropriation counterclaim.

[191]The Claimants say that liability under the loan notes was never intended to be subject to set-off but rather, as with a cheque, that such liability was to be treated as a liability arising under a free-standing contractual instrument. These, though, were not transferable Loan Notes. Whilst I would be prepared to accept that the Loan Notes represent a free-standing contractual instrument, no authority has been shown to me nor any principle that requires untransferable Loan Notes to be treated, by analogy with the way that cheques are, so that set-off is to be denied. The Loan Notes, with pages of conditions, were very far from equivalent to cash - compare Esso Petroleum Co Ltd v Milton [1997] 1WLR CA 938 at 946f, 954a (a Petition for leave to appeal was allowed but the case never reached the Lords).

[192]Mr Tager points out that set-off is expressly referred to in the SPA; the Claimants counter that by pointing to another reference in the SPA that suggests that set-off relates only to claims under the SPA, not to claims under the Loan Notes. This argument and its counter takes me no further; accepting as I do that the Loan Notes represent a free-standing contractual obligation, it would be wrong for me to seek to qualify that by reference to the terms of some quite different instrument. Reverting to the terms of the Loan Notes themselves, in all the extensive conditions that were made applicable to them, it could so easily have been provided that they were not to be the subject of any set-off and yet no such provision is found. I do not hold that liability under the Loan Notes or under Mr Deville’s guarantee is payable regardless of set-off and counterclaim where it is raised.

Summary of Conclusions in the Loan Note Action

[193]

(i) Prima facie SBP owes £2,275,000 and interest less £107,500 under the Loan Notes and Mr Deville owes £1,000,000 and interest under his guarantee. However, neither sum is to be taken to be yet payable.

(ii) Amongst the several accounts and inquiries required to be taken and made are ones dealing with what monies are shown in the accounts of RDG companies as sums lent to them respectively by SBP and what, if any, of that aggregate has been applied by the respective RDGs other than for Joint Venture purposes (but treating salaries and other ordinary overheads of the RGD companies as shown in their audited accounts as proper expenditure at the time, save to the extent, if any, that the same are shown to exceed the guidelines which I have described in para 171(xi) above).

(iii) Another account will need to be taken to establish what personal loans were made by SBP to Claimants and how far, if at all, they were taken into account as counter-items in establishing the personal loan account figures in the Schedule to the DoD, which figures I take to be authoritative.

(iv) Not until these accounts and inquiries are completed are the prima facie liabilities referred to above to be taken to be payable.

The Receivership Action

[194]I have already touched on a letter by which RJD1, RJD2 and Martin Daniels, on behalf of Bondor Developments Limited and Newton Byre respectively, appear to consent to the appointment of Mr Stephen Cork of Smith & Williamson as administrative receivers of those two companies. The Amended Particulars of Claim of the Claimants to the Receivership Action managed to plead their whole case without alluding to this letter. However, the Defence and Counterclaim of SBP and the Defence of Mr Cork and Mr Murphy assert the existence of the letter. It is addressed to Mr Cork at his firm, Smith & Williamson. It is dated 12th May 2003. It is headed ‘Bondor Developments Limited’ and ‘Newton Byre Limited’ and is signed by RJD1, RJD2 and Martin Daniels. It reads as follows:- “We the undersigned being the Directors of the above named Companies herewith, forthwith and immediately, consent to the appointment of you as Administrative Receiver in respect of the above Companies pursuant to Debentures respectively dated 4th September 2002 and 14th May [sic] 2003 in favour of Samuel Beadie (Properties) Limited. We further consent and agree that your receivership will enure for a minimum period of three years to enable Samuel Beadie (Properties) Limited to discharge its agreement with the Inland Revenue and HM Customs & Excise in relation to the liabilities of the above named companies to those preferential creditors.”

[195]SBP, Mr Cork and Mr Murphy assert that SBP relied upon that letter in appointing them as Administrative Receivers on 10th September 2003 and (if otherwise there was no valid appointment of them) that the relevant Claimants are thereby estopped from denying the validity of the appointment.

[196]In their Reply to that the Claimants deny that there is any such estoppel. They assert that the letter of the 12th May 2003 was the result of a false and misleading misrepresentation given to them by Mr Deville and that the letter of consent could therefore not be relied upon as giving rise to any estoppel. The recital adds:

“The First and Second Defendants were not appointed in reliance on the consents. 1. The consents extended only to the appointment of the First Defendant. 2. The consents were to the immediate appointment of the First Defendant. No purported appointment was made for nearly 4 months. 3. The purported appointments were made pursuant to the purported demands made on 8th September 2003.”

[197]To deal with those three points before going to other considerations; as for the first, it is, of course, a commonplace that more than one administrative receiver of a particular firm is appointed at any one time. It is done in order to avoid delays or vacancies should an appointee die or fall ill or otherwise be away from his office. It is not said that in some way the Claimants have suffered by way of the appointment of two receivers rather than one. There is nothing in the point. As to the second point, it is not the case that the consent in the letter was to only an immediate appointment. What was immediate was the giving of the consent; there is no restriction as to the time by which the administrative receiver should be appointed. As to the third point, there is nothing in the letter of the 12th May that limits the class of appointments to which consent was given to to appointments made at any particular time or within any particular interval or upon any particular grounds.

[198]Accordingly, the estoppel alleged by SBP, Mr Cork and Mr Murphy, if supported by evidence, could be expected to be met by evidence from RJD1 or others as to their reliance upon the alleged false or misleading representations of Mr Deville; thereby these Claimants could hope to deny force to the letter of consent. Mr Deville’s written evidence included that he had sent the letter of consent in draft to RJD1 asking for it to be signed. It seems to me that he and, through him, SBP was plainly intending to rely on it. No other reason was given for why it was requested. RJD1’s written evidence writes of his signing the letter but does not assert that it was procured by any misrepresentation that he had relied on.

[199]The letter of the 12th May was not put to any Claimant in supplementary oral evidence-in-chief but it was put to RJD1 in cross-examination. On Day 19 it was put to him that the whole point of the debenture was that, as soon as it was signed, receivers were going to be appointed. Mr Tager asked:

“Q. Wasn’t that the intention? A. Yes, that was where we were manoeuvred to.”

A little later Mr Tager asked:

“Q. … You would have had no doubt that the intention was to immediately appoint receivers. Is that right? A. Yes. Quite wrongly we believe now, Newton Byre was not insolvent nor were the other companies. They were just dormant.”

A. Yes, that was where we were manoeuvred to.”

[200]On Day 23, still in the cross-examination by Mr Tager of RJD1, there was new reference to the letter of the 12th May. Mr Tager asked:

“Q. That’s the form you signed together with your son and your brother, consenting to the appointment of the receivers. Is that right? A. Yes. Q. Why did you sign that? A. Because of the position we had been put in. Q. Did you mean what you said when you signed that document? A. These were the words that came from them and we accepted these were the words. Q. Did you intend that Mr Deville should rely on this? A. I can’t answer that. Q. Well just think about it. Did you intend that, you having signed this, Mr Deville would then take steps to appoint receivers? A. If that was the process, yes. Q. So did you intend that he should rely on this? Did you intend the receivers to rely on it? A. I can’t answer that. Q. Well, think about it. Why were you signing a document addressed to them? A. This was the document that was sent to us. Q. Just look at the document, I have no doubt you’re familiar with it. A. No, I am reminded of it now. Q. Ok. Well, now that you are reminded of it. A. Yes it’s a form we signed. Q. Did you intend that the receivers would rely on it? A. I don’t know the answer to that. Q. Well, you are an intelligent man, a very experienced businessman, you must know whether, when you sign a document addressed to another party, whether you intend him to rely on it, or not? A. I’ve never been put in this position before. Q. Well think about it today. If this is the very first time in your life when you have had to consider, when you write to a complete stranger, whether or not you expect that he would be relying on it. A. I can't answer that. Q. I suggest you can. Try a little harder. A. We signed the document and sent it off.”

Q. Why did you sign that? Q. Did you mean what you said when you signed that document? Q. Did you intend that Mr Deville should rely on this? Q. Well, think about it. Why were you signing a document addressed to them? Q. Did you intend that the receivers would rely on it? A. We signed the document and sent it off.”

Q. Did you intend that the receivers would rely on it?

[201]That evidence falls very short of proving that some misleading or false representation by Mr Deville procured the letter of the 12th May and no other evidence reliably proved that either. The “manoeuvre” was never adequately explained.

[202]Accordingly I am, in my judgment, entitled to regard the letter of the 12th May 2003 as a letter which consented to the appointments ultimately made.

[203]Although almost any debenture is likely to specify conditions upon which an Administrative Receiver may be appointed despite the company concerned wishing otherwise, there is nothing about the provisions of these debentures that precludes a valid appointment of an Administrative Receiver even when none of the applicable conditions has arisen but where the appointment is consented to. Here I can take it that consent was given so there is no need to examine if pre-conditions were satisfied. That consent may have been “engineered” (to use Mr Ullstein’s word) by Mr Deville and Mr Deville may well have “manoeuvred” (to use RJD1’s word) to that end but the engineering and the manoeuvre was not such that I can ignore the consent. Accordingly I find the Administrative Receivers duly appointed.

[204]But let it be supposed that the consent cannot be relied upon. Even so, the Defendants rely on clause 10E of the debenture under which principal money became payable:- “E. If the company stops payment or ceases or threatens to cease to carry on its business;”

[205]Once that has occurred the debenture holder may appoint a receiver. As I have mentioned - see para 98 above- there is no provision that requires prior notice either of the principal money having become payable or of an intent to appoint a receiver. There was oral evidence from RJD1 on this topic in his cross-examination by Mr Tager. Asked what trading the RDG had done in the year 2003 (the RDG being a term that would have included both Bondor Developments Limited and Newton Byre Limited) he replied:

“None, I don’t think in that year. I cannot remember exactly, but I don’t think we did any”

. It was suggested to him that the RDG had ceased trading in the autumn of 2002 and he replied:- “If that was the date, yes, that was the date.” It was put to him that when the erstwhile RDG offices at Grange House were closed and when all the staff were made redundant in about October 2002 that all the companies ceased trading. Asked whether that was so, he replied:- “To intents and purposes, yes.” I have already cited RJD1’s assertion that the companies were “dormant”.

[206]In my judgment the £3,000,000 principal money due under each of the Bondor and Newton Byre debentures had become payable by early 2003 at the latest and throughout 2003. Thus the appointment of Messrs Cork and Murphy was proper.

[207]A debenture can, of course, be granted in respect of a specified sum as principal money whether or not the grantor owes that sum or any sum to the debenture-holder. The debenture can, for example, be granted in support of someone else’s debts. The debentures in this case were not of the kind which requires one to see if the grantor owed money at the time on some particular account. £3,000,000 was specified as the principal money. But, if one did have to look at the account between one of the two grantors, Bondor, and the debenture-holder, the former, in its accounts both of the year to 30th June 2003 and 30th June 2004, show it to be indebted to SBP in not insubstantial sums, £249,895 and £302,578 respectively. As to Bondor, even if there had been no specified principal sum, other money would have been seen to be owing to the debenture-holder, SBP. RJD1’s assertion that the companies were not insolvent, I would add, would not be a ground for making the appointments bad as nothing in the debentures restricts the appointment of Administrative Receivers to insolvent companies.

[208]On the footing that the appointments were valid then, in turn, the steps taken by the Administrative Receivers (effectively, in that regard, shareholders of Bondor Developments Limited) to put subsidiaries of Bondor, namely the Fourth to Ninth Claimants, into administration must also be taken to be valid. I thus do not grant the injunctions, intended to restrain Mr Cork and Mr Murphy, as set out in paragraph 1 of the prayer to the Amended Particulars of Claim in this action. Nor do I make any of the declarations as to invalidity sought in paragraph 2 of that prayer. I do not order the removal from office of Mr Cork and Mr Murphy or either of them.

[209]I was not addressed on the impact of section 232 of the Insolvency Act 1986.

[210]On SBP’s counterclaim I do grant the declaration that Messrs Cork and Murphy were validly appointed. SBP also counterclaims for an account. I reject its counterclaim for interest as part of the account claimed. I do not, either, order the account counterclaimed for. As it seems to me, the global accounting ordered in the Main Action and in the Loan Notes Action will cover everything that is sought to be raised in the counterclaimed account. That some account is necessary I readily accept but I reiterate that, unless the accounts and inquiries ultimately taken and made are all embracing, there will be every likelihood of yet further proceedings being issued. If for any reason it transpires that the accounts already ordered do not cover what is sought in the counterclaim to the Receivership Action then SBP is to be at liberty to ask the Master for the other accounts to be enlarged to include the account sought to be raised in this counterclaim. Thus, rather than refusing such account I shall stand it over generally with liberty to restore should it prove necessary to do so but in the hope and expectation that the global account that I have spoken of will cover everything that needs to be covered.

The Pickenham Action

[211]This action began in June 2005. Pickenham Homes Limited, the only Claimant in this action, was earlier a wholly owned subsidiary of the only Defendant, Pickenham Estates Limited. All the shares in Pickenham Homes were sold (as I have described in the Loan Notes Action) by Pickenham Estates to RJD1 and now Pickenham Homes is wholly owned and controlled by RJD1. All the shares in Pickenham Estates, the erstwhile Matchcatch Limited, were sold, it will be remembered, to SBP by the SPA and, in consequence, Pickenham Estates is now controlled and owned by Mr Deville or allies of his.

[212]At first blush the action is a simple one. The Particulars of Claim are six short paragraphs long. In trading between the two companies, so says the Claimant, here relying on inter-company indebtedness as shown in accounts, the Defendant became indebted to the Claimant in the sum of £126,973 as shown in the unaudited accounts of Pickenham Estates for the period ending the 28th February 2005. On the 11th April 2005 the sum was demanded by Pickenham Homes but was not paid. Interest is claimed under section 35A of the Supreme Court Act 1989. The debt, the demand and also all the interest is admitted in the Defence.

[213]But there is a counterclaim. Some months after the Particulars of Claim were served on it, Pickenham Estates received, by assignment from SBP, the benefit of a debt to SBP from Pickenham Homes in the sum of £395,150.21, a sum shown as an inter-company loan in the books of both Pickenham Homes and SBP. The resulting arithmetic, having regard also to interest, so said the counterclaim, was that Pickenham Homes owed Pickenham Estates £262,946.07.

[214]That was denied in the Amended Reply and Defence to Counterclaim of the 20th May 2006. The so-called inter-company loan accounts, so Pickenham Homes now asserted, were not true loan accounts. That I do not accept. Rather, said Pickenham Homes, they were but part of a much larger series of dealings between Participants in the Joint Venture, which dealings and the nature of the Joint Venture were in issue in the Main Action. That I can broadly accept although the word “Participants” plainly does not there have the meaning, exclusively referring to individuals, which the word “Participators” has, for example, in the DoD and in the declaration of the 12th November 1997. There were subvention payments between companies, say the Claimants; I do not accept that for the reasons that I have given – see para 52 above.

[215]The pleading says that there should have been a pooling of the assets and liabilities as between Joint Venturers pending an ultimate taking of a global account of the dealings of the Joint Venture. Mr Knight denied that was the case and, up to a point, I accept his denial; rather than a simple pooling there were, in effect, true inter-company loans entered, time after time, in the books of the various companies as such. When he got to Grange House, from which the RDG end of the Joint Venture was conducted and at which he spent some 2 days a week, Mr Knight was told that the way things were recorded was by way of inter-company loans but with all to be recorded in a full account. As I have mentioned, he was not aware of any interest being payable and saw no invoices for interest or any other document recording it. There would be a formal allocation of costs and a later account of profit and loss rather than an accounting as the Joint Venture went along and all the principal players – RJD1, Martin Daniels, RJD2 and Mr Deville - so told him. As an example, he said, Newton Byre Construction Limited was the Joint Venture’s construction arm but its invoices to the Joint Venture companies for which it built became only Joint Venture inter-company debts. All that anybody told Mr Knight, he said, was that at some point in the future accounts would be drawn up; there was, he said, “no joint venture accounting as such as we went along”. Whilst there had been some distributions “on account”, they were to be brought back in one final form and only when everything, including inter-company indebtedness, was cleared would there be any form of distribution.

[216]The Pickenham Action, for all its relative simplicity, is, I fear, as blighted as are other actions by the incompleteness of the accounting that is now before me; one cannot say with any certainty whether this or that sum is owed as principal money. As for interest, whilst both sides respectively claim and counterclaim for interest under section 35A of the Supreme Court Act 1981, it is to be remembered that that jurisdiction is discretionary. Given the evidence I have received, in particular, that of Mr Knight on the subject, which I accept, I do not award interest to either side under section 35A on inter-company loans. As for principal money, the accounts and inquiry which I direct under the heading of the Pickenham Action is to include whether, within the global account, and in the light of the assignment of the 12th September 2005 from SBP to Pickenham Estates Limited (which is admitted) any and, if so, what sum is owed by Pickenham Homes to Pickenham Estates. The directions to be laid in draft before the Master should include accounts and inquiries to establish an answer.

[217]Accordingly, save that I order such accounts and inquiries, I grant no relief on claim or counterclaim in the Pickenham Action but stand the same over generally to await the outcome of the global accounting process.

Conclusions

[218]There have been so many issues raised and so many heads of relief claimed that even the crudest of summaries of what has been decided will be lengthy. But even a crude summary may be helpful and, on that basis and without intending to qualify in any way the earlier parts of this judgment, I summarise what has been so far decided as follows: 225. The Main Action Para(s) No 1. Credibility of principal witnesses 19-31 2. The hybrid nature of the joint Venture; No 1890 Act Partnership 36; 42 3. No prohibition on inter-company loans at no interest 43 4. Directors’ loan accounts in the DoD – clear off all claims 49 5. “Bank borrowings” includes indirect borrowings from bank 50 6. Inter-company loans payable and receivable 52; 54 7. No "subventions" 52 8. The DoD is the accounting starting point; the form of accounting it requires 55-63 9. The CJV was intended to mislead; it was said by Mr Deville that the CJV was only “for funding” and the Daniels relied on that 79-91 10. The DoD continues to regulate affairs even after the CJV 92 11. The formalities of the appointment of the Administrative Receivers were complied with 99-100 12. No funding obligation on SBP 14; 154-155 13. Obligations of good faith and as to no conflict of interest .115, 116 14. No duty not to compete or to disclose development opportunities 117, 118 15. No retainer of Mr Deville 119 16. No good claim for loss of salaries 120-121 17. No relief as to Fawkon Walk 123-128 18. No relief as to Walsworth Road 129-133 19. No immediate relief as to the Claimants' loan accounts 134 20. Squires Close and proceeds a Joint Venture Asset 134-138 21. Cricketers and its proceeds still held outside the Joint Venture on the trusts of the Declaration of 1.6.98. No immediate payment by SBI required as to Cricketers 139-142 22. Inquiry as to Elstow and the onus in that inquiry 143-147 23. Inquiry as to Volvo and the onus as to that inquiry 148- 24. No relief needed as to Gainsborough Retail Park 149 25. No interest on inter-company loans 150 26. No repayment of Participators' loan accounts yet 151 27. Exclusion from the Supervisory Board and onus on that subject 157-162 28. Forged notes 163-167 29. The form of the global accounting and directions to be framed accordingly 168-172 226. Loan Notes Action 30. The defence of the Loan Notes being Joint Venture Assets fails 174-175 31. The defence of default within the Intercreditor Deed fails 176-177 32. The defence of illegality fails 178-179 33. The CJV fraud fails 180-181 34. The Joint Venture debts fraud fails 182 35. The Joint Venture misappropriation defence requires a global account 183-184 36. The Hitchin misappropriation defence fails 185 37. The personal loans to Claimants defence requires a global account 186- 38. The rent arrear defence succeeds and will need to be taken into account 187-189 39. Set-off is allowable against the Loan Note liability and to Mr Deville under his guarantee 190-192 40. Summary of the Loan Note position 193 227. The Receivership Action 41. The appointments were consented to and accordingly valid 194-203 42. Condition E was broken so the appointments were valid 204-207 43. The administrations arranged by the Administrative Receivers were valid 208 44. No injunctions or declarations as to invalidity are granted nor any removal from office. There is a declaration as to validity 210 45. No separate account but all part of the global account 210 228. The Pickenham Action 46. The global account is to include the issues 215 47. No s.35A interest is awarded on the inter-company loan accounts 216 48. No other relief at this stage 217 I shall need to discuss with Counsel the form of my order and, no doubt, I will hear argument as to costs. A minute of Order will be needed.

Cited in 1 later judgment

Pickenham Romford Ltd v Deville 2013