Solland Projects LLP v Nautiloides Comercio International E Servicos Sociedade Unipessoal LDA & Anor [2012] EWHC 1957 (TCC)

Case No HT-11-185

[2012] EWHC 1957 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

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

Date 04/07/2012

Before

MR JUSTICE COULSON

Between

Solland Projects LLPClaimant

Mr Daniel Lightman (instructed by Bircham Dyson Bell) for Claimant

Mr Christopher Pymont QC and Ms Rachel Ansell (instructed by Hogan Lovells LLP) for Defendant

Mr Anthony Peto QC and Mr Fred Hobson (instructed by Jones Day) for Proposed Defendant/Applicant

Hearing Hearing dates: 3 rd& 4 th July 2012

Judgment

INTRODUCTION

[1]By an order dated 2 December 2011, Mr Justice Akenhead ordered the trial of a preliminary issue between the parties to start on 2 July 2012. The preliminary issue was in these terms:

“1. Was the £1 million payment made on or about 24 November 2008 an advance payment made on account of the Management Contract (entered into by the parties dated 6 January 2006) as alleged at paragraphs 11-14 of the Defence and Counterclaim, or was it an advanced payment made on account of a separate agreement/joint venture as alleged in paragraphs 7.1 to 10.4 of the Reply and Defence to Counterclaim?”

[2]It is the defendant’s case that the payment was made under the Management Contract and therefore fell to be taken into account in the financial reconciliation under that contract, which forms the central dispute in these proceedings as a whole. It is the claimant’s case that the payment should not be taken into account because it was made pursuant to a completely separate Joint Venture agreement made between Mr and Mrs Solland, the directors of the claimant company, in person, and Mr Moussa Salem, one of the beneficiaries of the trust which controls the defendant company.

[3]At the start of the trial of the preliminary issue there were two applications. The first was made by Mr Pymont QC and Ms Ansell on behalf of the defendant, effectively seeking to strike out the claimant’s case that the payment was made under the alleged Joint Venture agreement, and instead seeking to argue that, by reference to the pleadings and some of the evidence, the court was bound to answer the preliminary issue in the defendant’s favour. The second was an application on behalf of Mr Moussa Salem personally, made by Mr Peto QC and Mr Hobson, that the trial of the preliminary issue be adjourned, so as to allow Mr Salem to be joined in his own name as a defendant. This was because of the potential consequences to him of a finding that there was a Joint Venture agreement pursuant to which he had incurred potentially significant liabilities. After a debate, it was agreed that I would deal with these two applications at the outset of the trial since, if the defendant was right, that would be the end of the preliminary issue and, if the defendant was wrong and Mr Salem’s application was granted, then the trial of the preliminary issue would, or at the very least may, have to be adjourned.

[4]I propose to deal with these two applications in this way. In Section B, I outline the relevant facts endeavouring, wherever possible, to do so by reference to matters which are not controversial. In Section C, I analyse and resolve the application to strike out the claimant’s case made by the defendant. In Section D, I go on to address the application that Mr Salem be joined as a party to these proceedings, pursuant to CPR 19.2. THE RELEVANT FACTS

B1 The Management Contract And The Payment Mechanism

[5]By a Management Contract in the JCT 1998 edition, with amendments, the defendant engaged the claimant to act as the management contractor in respect of the refurbishment of a property at 10 Belgrave Square in London. The contract administrator was named as Peter Grabham Associates, to whom I shall refer as ‘Grabham’. The claimant was paid pursuant to interim valuations and interim certificates issued by Grabham. If there were any queries about the sums being invoiced by the claimant, these were referred to Rothschild Trust Guernsey Limited, whom I shall call ‘Rothschild’. They were trustees of the R2 Trust, a discretionary trust which, in a bewildering series of complex inter-company arrangements, appears to own the defendant company. The beneficiaries of the R2 Trust include, but are not limited to, Mr Moussa Salem.

[6]As to the nature and purpose of the defendant company, the defendant admits in its Defence that it “was formed (or purchased off the shelf) to act as the vehicle for the purchase, improvement and sale of 10 Belgrave Square”.

[7]At times, particularly during the latter part of the correspondence when relationships were beginning to worsen all round, it was the defendant’s case that it was only capable of acting through its one director, Mr Bruno Sa Figueira. Indeed in that capacity, Mr Sa Figueira signed the statement of truth at the end of the Defence and Counterclaim. The suggestion was that it was only Mr Sa Figueira who could, amongst other things, sanction payments by the defendant company, and that this was not something which, for example, Mr Moussa Salem could do. The defendant’s disclosure, however, has revealed that, at least potentially, Mr Sa Figueira has not been a director of the defendant company since 2004 and there is no material from the individual who, according to the documents, replaced him in that role After the handing down of this judgment, Mr Pymont QC introduced a further document which suggested that Mr Sa Figueira was subsequently reinstated to his role as director of the defendant company before many of the relevant events occurred. . That is one of numerous unresolved matters to which reference has been made in passing during the hearing of these applications.

B2 The Alleged Joint Venture Agreement

[8]It is the claimant’s case that, in addition to and separate from the Management Contract, Mr and Mrs Solland personally came to a Joint Venture agreement with Mr Salem, pursuant to which they would share the profits arising out of the refurbishment of 10 Belgrave Square. The profit split is alleged to have been originally 50% each, but was ultimately resolved at 37 ½ /62 ½% in Mr Salem’s favour. Mr Salem alleges, amongst other things, that earlier discussions about a profit-sharing agreement were superseded by the Management Contract. As previously indicated, if Mr Salem was wrong about that, and if there was a separate Joint Venture agreement then, depending on the outcome of a raft of other arguments, he could potentially be liable to Mr and Mrs Solland personally for as much as £30 million. That explains why he is particularly concerned about the outcome of these applications.

[9]In case it is not already plain, I emphasise that the alleged Joint Venture agreement was made, or was alleged to have been made, between the Sollands (not the claimant), and Mr Salem (not the defendant). The existence or otherwise of that agreement only arises in these proceedings by way of a side wind. But it does arise, because although it is the defendant’s case that the £1 million payment should be brought into account in the final account reconciliation under the Management Contract, the claimant company denies that case on the ground that the payment was made under the separate Joint Venture agreement. Accordingly, the claimant maintains that that sum was not to be taken into account when calculating what, if anything, was due under the Management Contract.

B3 The Parties’ Pleaded Cases As To The £1 Million Payment

[10]The defendant alleges in its Defence:

“11. In or about November 2008, Moussy Salem (who is a beneficiary of the R2 Settlement Trust, the trustees of which are the ultimate owners of the Defendant) was told by Abner and Grazyna Solland, the directors of the Claimant, that:- 11.1. The Claimant was in severe financial difficulties due to an unrelated legal dispute and, as things stood, there was a real risk that it would not be able to continue with the Project; 11.2. The Claimant needed a substantial advance payment in order to assist its cashflow problems caused by the unrelated legal dispute so that the Claimant could complete the Project. 12. Following this conversation, Mr Salem discussed the matter with the director of the Defendant and the Defendant agreed that an advance payment of £1 million would be paid to the Claimant in order to ensure the Project was not put in jeopardy but on the condition that it would be treated as an advance payment which would be set off against future costs incurred on the Project. At that time, it was the Defendant’s intention that the £1 million would ultimately be used to dress and accessorise 10 Belgrave Square, i.e. would be used to purchase such things as rugs, tableware and glassware. 13. Having received authority from the Defendant, Mr Salem acting on behalf of the Defendant, informed Mr and Mrs Solland, who were acting on behalf of the Claimant, that the Defendant would make an advance payment to the Claimant of £1 million on the condition that it would be treated as an advance payment which would be set off against the future costs incurred on the Project. 14. In accordance with that agreement on 19 November 2008 the Claimant issued an invoice to the Defendant for the sum of £1 million which it described (as was the case) as an “advance as agreed in respect of fixed services fee agreement” (“the Advance Payment Invoice”). On 24 November 2008 the Defendant paid the sum of £1 million to the Claimant on the express understanding and pursuant to the agreement reached between the parties that it was an advance payment which would be set off against future costs incurred on the Project (“the Advance Payment”).”

[11]The claimant alleges in its Reply:

“7.1 Mr Solland having sourced 10 Belgrave Square and recognised the potential of making a significant profit through refurbishing and then selling it, in or about May 2004 Mr Solland (on behalf of himself and Mrs Solland) and Mr Salem orally agreed (“the 2004 Agreement”): 7.1.1 That Mr Salem would purchase 10 Belgrave Square; 7.1.2 That Mr Solland would conduct the negotiations for the purchase of 10 Belgrave Square on Mr Salem’s behalf; 7.1.3 That Mr and Mrs Solland would provide all architectural and interior design services required for the redevelopment of 10 Belgrave Square; 7.1.4 That Mr Salem would meet the costs of the acquisition, redevelopment and sale of the property; 7.1.5 That after the redevelopment had been completed, 10 Belgrave Square would be sold; 7.1.6 That Mr and Mrs Solland would receive 50% of the net proceeds of sale, by which expression was meant the sale price less the costs of acquisition, the costs of refurbishment and furnishing and the costs associated with the sale of the property; and 7.1.7 That in the event that it was decided not to sell 10 Belgrave Square once its redevelopment had been completed, Mr and Mrs Solland would be entitled to receive a sum equivalent to 50% of the notional net proceeds of sale of the property, by reference to its then current market value. 7.2 On or about 12 January 2005 Mr Salem arranged for the Defendant to purchase a long leasehold of 10 Belgrave Square from the Grosvenor Estate Belgravia for a sum which the Claimant believes to be £11.45 million. Subsequently, on or about 24 September 2009, the Defendant purchased the freehold to 10 Belgrave Square from the Grosvenor Estate for £100,000. 7.3 At around the time of the purchase of the long leasehold to 10 Belgrave Square Mr Salem orally informed Mr and Mrs Solland that the Defendant was an offshore corporate vehicle through which he had chosen, primarily for personal tax reasons, to acquire the legal title to 10 Belgrave Square and to contract with the professional team and works contractors required to carry out the refurbishment works to the property. 7.4 In the course of a meeting in about May 2005 between Mr Salem and Mr Solland in the boardroom of Mr Salem’s offices at Parker Logistics, 80 Grosvenor Street, London W1K 3JX, Mr Solland (on behalf of himself and Mrs Solland) and Mr Salem orally agreed to amend the 2004 Agreement (“the 2005 Agreement”) so as provide: 7.4.1 That Mr and Mrs Solland would receive 37.5%, instead of 50%, of the net proceeds of sale of 10 Belgrave Square; 7.4.2 That a separate fee would be paid for services provided in managing the redevelopment of 10 Belgrave Square, which separate fee (of some £2.5 million) Mr Salem subsequently procured that the Defendant would pay under the Management Contract; and 7.4.3 That whereas it had previously been intended that the profit-sharing agreement would be documented, it would not in fact be reduced to writing. 7.5 It is admitted that in or about November 2008, Mr Solland informed Mr Salem that he and Mrs Solland were experiencing cash flow difficulties. 7.6 Mr Salem agreed to make a £1 million advance payment on account of Mr and Mrs Solland’s entitlement under the 2005 Agreement to a sum equivalent to 37.5% of the net proceeds of sale of 10 Belgrave Square. 7.7 It is denied that Mrs Solland was a party to this conversation. 7.8 The Contract Administrator was not informed of this agreement by Mr and Mrs Solland, Mr Salem or the Defendant, as the payment was not a payment pursuant to the Management Contract. 7.9 The Claimant is unable to admit or deny, and requires the Defendant to prove, the relationship between the Defendant, Mr Salem and the R2 Settlement Trust. 7.10 Save as aforesaid, paragraph 11 is denied. 8 As to paragraph 12: 8.1 The Claimant is unable to admit or deny, and requires the Defendant to prove, the facts and matters set out in the first sentence. 8.2 Paragraph 7.5 to 7.8 (above) is repeated. 8.3 The Claimant is unable to admit or deny, and requires the Defendant to prove, the facts and matters set out in the second sentence. The Claimant notes and relies on the fact that it is not alleged that it had been agreed that the £1 million payment would be “used to dress and accessorise 10 Belgrave Square” but rather that it is alleged that was the Defendant’s intention. The Claimant notes that: (i) there was no written agreement regarding dressing and accessorising 10 Belgrave Square and (ii) the Contract Administrator at no material time referred to any such agreement, written or otherwise. 9 For the reasons set out at paragraph 7 (above), paragraph 13 is denied. At no stage was it suggested to Mr and Solland, nor was it at any stage agreed by them, that the £1 million payment would be “treated as an advance payment which would be set off against the future costs incurred on the Project”

. Paragraph 7.8 (above) is repeated. 10 As to paragraph 14: 10.1 It is admitted that the Claimant issued an invoice to the Defendant dated 19 November 2008, for the sum of £1 million, containing the wording “Advance as agreed in respect of fixed services fee agreement”. It is denied that the invoice was rendered in accordance with the agreement alleged by the Defendant. Such wording had been dictated by Mr Salem to Mr Solland, who had informed Mr and Mrs Solland that such wording was required to make the payment. 10.2 Save that it is admitted that the Claimant received £1 million on or around 24 November 2008, the second sentence is denied. No express shared understanding or agreement had been reached by the parties other than that set out at paragraph 7 (above). There was at no material stage a suggestion, let alone an agreement, that the £1 million payment “would be set off against future costs incurred on the Project”. The Claimant notes and relies in this regard on the acknowledgement, at paragraph 19.2 of the Defence and Counterclaim, that it had merely been “assumed” by the Defendant that the payment would be used for “dressing and accessorising of 10 Belgrave Square” and that there is no suggestion of an agreement to this effect. 10.3 The Claimant notes and relies on the fact that the Contract Administrator had no involvement in the invoice or its payment, and made no reference to the £1 million payment, whether in documents or orally, at any material stage. This is because the payment was not a payment pursuant to the Management Contract. The Contract Administrator recognised that the payment was not pursuant to the Management Contract during the course of a meeting at the Claimant’s office on 28 April 2010. 10.4 The provisions for payment and the scope of the works are set out in the Management Contract. No allowance is made for an advance payment of the kind alleged by the Defendant.”

[12]On the basis of those pleadings, the court ordered the preliminary issue which I have identified in paragraph 1 above. It would be right to say that, at times during these applications, parts of these pleadings have been shown to be inaccurate or, perhaps putting it more kindly, to have been overtaken by events. Thus, by way of example, although Mr Salem has been closely involved in the litigation (he has attended previous court hearings and provided a lengthy witness statement), he now says that the defendant’s pleaded case, set out above, is incorrect in an important respect. He claims that he discussed the question of the £1 million payment, not with the director of the defendant, as pleaded by the defendant, but with Mr Lister of Rothschild. That could be important because it might impinge on the issue, which I discuss in a moment, as to who actually paid the £1 million.

B4 The Circumstances In Which The Payment Was Made

[13]The evidence about the circumstances in which the payment of £1 million was made demonstrates, in my view, that the claimant’s case (to the effect that the £1 million was paid under a Joint Venture agreement and not the Management Contract) is at least arguable. In support of that case, to the effect that the payment did not arise under the Management Contract, the claimant can rely on the following: a) The £1 million was never the subject of an interim certificate; b) The £1 million was never mentioned in the Grabham interim valuations as representing a sum paid under the Management Contract; c) The £1 million was not the subject of VAT, which was neither invoiced nor paid. Mr Solland says that that was at Mr Salem’s instruction, but that is a matter of debate. I note, however, that all the payments under the Management Contract were subject to VAT; d) The payment was not apparently authorised by the relevant director of the defendant, whoever precisely that may be; e) The payment was described by Rothschild as ‘property fees’ which is an odd way to describe an interim or advanced payment under a Management Contract; f) The works described in the invoice (which, again, Mr Solland says was dictated by Mr Salem, an assertion which is also the subject of debate), was in these terms:

“Advance as agreed in respect of fixed services fee agreement”

. That too is an odd way to describe an interim or advanced payment under a Management Contract, although it may also fairly be said that it is an equally odd way to describe a payment under a Joint Venture agreement; g) When Grabham subsequently learnt about the £1 million payment, they pointed out to Mr Lister, at Rothschild, that the payment did not appear to arise under the Management Contract and that they were not therefore treating it as a payment under the Management Contract. Mr Lister did not respond to that email or say anything to the contrary.

[14]However, all of those points can only take the claimant so far. If the claimant wants to establish that the payment was made under a completely separate Joint Venture agreement, then the claimant needs to establish that such a separate agreement actually existed. It was at that point that both of these applications arise. C THE APPLICATION TO STRIKE OUT

C1 The Parties’ Respective Cases

[15]The defendant’s position, which is akin to an application to strike out pursuant to CPR 3.4, is straightforward. In his clear submissions, Mr Pymont QC pointed out that, whatever the evidential position in relation to the payment, the claimant’s insurmountable difficulty was this: there is no dispute that the £1 million was paid by the defendant to the claimant, and there was only one way in which any obligation to pay could arise as between the claimant and the defendant, and that was under the Management Contract. Accordingly, he submitted that, on the pleadings and on the evidence, the only liability in respect of which the £1 million payment could have been made was the liability which the defendant had pursuant to that Management Contract. In addition, he submitted that the claimant could not seek to get round that proposition by arguing that the structure of the defendant company was some sort of sham or that, in some way, Mr Salem was the defendant’s alter ego, thus somehow fixing the defendant with a liability to pay the debts incurred by Mr Salem. He relied on various arguments of law in support of those contentions.

[16]It is unnecessary for me to resolve those matters because, for the purposes of this application, Mr Lightman, on behalf of the claimant company, conceded that the claimant was not saying that the structure of the defendant was a sham, or that the defendant company was Mr Salem’s alter ego. Indeed, he maintained that the Joint Venture agreement was agreed between Mr Salem, on the one hand, and the Sollands personally, on the other, and that the defendant company was not involved at all I should add that, for present purposes, I leave aside the question of agency, another possible basis of claim raised (only to be dismissed) by Mr Pymont QC, in respect of which Mr Lightman made no similar concessions. On the contrary, he pointed out that in the pleadings, to which I have already referred, the defendant itself seems to suggest that, certainly on occasion, Mr Salem was acting as its agent. . But, in answer to the critical submission, that the payment must have been made to discharge the defendant’s liability under the Management Contract because there was no other relevant liability under which that payment could have arisen, Mr Lightman’s principal submission was that, on the evidence, it was at least arguable that the payment was made, not by the defendant, but as a distribution by the trustees on behalf of Mr Salem personally.

C2 The Payment Itself

[17]This thrust into the limelight, for the first time, the circumstances in which the payment was made/authorised. The evidence, as it stands, is as follows: a) A first invoice was raised by the claimant on 17 November 2008. It was in the sum of £1.175 million, inclusive of VAT. It was sent to Mr Lister at Rothschild. Shortly thereafter it was cancelled, apparently because it included VAT; b) A second invoice was raised two days later on 19 November 2008, in the sum of £1 million. That was the invoice which included the words “Advance as agreed in respect of fixed services fee agreement”. VAT was not included; c) Mr Moussa Salem and his brother Robert, both beneficiaries under the R2 trust, recommended that the money be paid, and Mr Lister of Rothschild then arranged payment; d) There was no evidence that a director of the defendant company or Mr Sa Figueira was involved in recommending or approving that payment of £1 million.

[18]The identity of precisely who paid the invoice may be of some importance, particularly if the way in which Mr Lightman now puts the claimant’s case is right. As to that, the contemporaneous evidence shows that, on receipt of the invoice, Mr Lister emailed Mr Robert Salem to say “I have just spoken to Moussy re this payment. Are you happy that we use GBP that we already have at UBP for this?” Mr Robert Salem responded:

“Please kindly be recommended to proceed with your main custodian”

. And Mr Moussa Salem simply said “Recommend to proceed”. Mr Lister explains these somewhat cryptic exchanges in his witness statement at paragraph 15 in this way:

“I note from the email correspondence which follows that I then sought the recommendation of Robert Salem to use funds in one of the Trust’s underlying company’s UBP bank account for the purpose of making the payment. That is not unusual given the size of the payment being made. Robert Salem confirmed that I should proceed with the “main custodian”, by which I understood him to mean the UBP account, being the account which had the most liquidity at the time. The payment was then authorised the same day.”

C3 Analysis

[19]On the face of that material I consider it to be at least arguable that the £1 million was paid, not by the defendant company, but as a distribution on the instruction of the trustees, with the money coming from one of the “underlying companies” (as they were called), administered by Rothschild as trustees of the R2 Trust. That could also be consistent with clause 2.1 of the Trust Deed, which provided that the trustees could make payment to third parties for the benefit of the beneficiaries of the R2 Trust. Thus it is at least arguable that this payment was made by the trustees for the benefit of Mr Moussa Salem and that would be, or could be, consistent with the existence of the Joint Venture agreement.

[20]Moreover the argument that this was not a payment by the defendant company could be strengthened, rather than weakened, by the fact that, as I have noted, it appears that no approval or recommendation in connection with this payment was made by a director of the defendant company. However, as things presently stand, there is no more evidence on which the court could form a more concluded view as to the source of the money that was paid.

[21]But the absence of better evidence is hardly surprising, since the source of the £1 million is not a matter which, on the face of the pleadings, would appear even to be in issue. That then is the immediate problem with the analysis that I have so far set out. As Mr Pymont QC demonstrated at the start of his submissions, the claimant has admitted in the Reply that the payment was made by the defendant. In other words, Mr Lightman’s case about the possible distribution by trustees, advanced for the first time yesterday afternoon, was contrary to the claimant’s own pleading. Although Mr Lightman properly accepts that, confirming in his oral submissions that the admission to the contrary was incorrect, there is no application to amend the Reply. Instead, Mr Lightman submitted that, in some way, the preliminary issue had “superseded” the pleadings, so that the pleading point was not open to the defendant.

[22]In my view, that is a fallacious submission. The preliminary issue arises out of the pleadings, not the other way around. In the usual way, if something is admitted by one party, then there is no need for the other party to adduce evidence about that matter. Thus I consider that Mr Pymont QC is right to say that the claimant’s new way of putting their case as to the payment has or may cause the defendant considerable prejudice if it is dealt with straightaway, because the defendant has simply not been able to consider the issue, and has not been able to consider what further evidence may be required to deal with it.

[23]As I hinted during the oral submissions, I am not going to strike out the claimant’s case on the basis of a pleading point and, to be fair to Mr Pymont QC, he did not ask me to. I am therefore faced with a situation where, on the one hand, there is some evidence which suggests that the claimant’s case is at least arguable and, on the other, an admission which negates that case altogether. In those circumstances, it seems to me that the just course is to require the point to be properly pleaded out by the claimant, with an explanation as to how and why the claimant seeks to resile from an admission, so that the defendant (and indeed the claimant), can consider whether the point requires any further evidence before it can be properly resolved by the court.

[24]For these reasons, therefore, I do not allow the defendant’s application to strike out the claimant’s case. I make clear that this is because of the way in which Mr Lightman now puts his case, which I consider to be arguable, but which I consider requires an application to amend and an explanation in the evidence. On that basis, of course, the trial of the preliminary issue would have to be adjourned, although the length of any adjournment might be the subject of debate. But the most pressing question is how that conclusion fits in, or clashes with, the second application made by Mr Peto QC. D. THE APPLICATION TO JOIN MR SALEM AS A PARTY

D1 Is There An Issue In Which Mr Salem Has A Personal Interest?

[25]The current dispute is whether the £1 million was paid under the Management Contract or the Joint Venture agreement. If it was paid under the latter, it is irrelevant to the final account reconciliation and therefore, on one view, irrelevant to the resolution of these proceedings. But in order for the court to decide that issue, the court has to resolve the antecedent question which is bound up with, but not separately identified in, the current draft of the preliminary issue. Was there a Joint Venture agreement at all?

[26]There seems to have been a certain amount of confusion on all sides about the extent to which this sub-issue was in play in these proceedings. In my view, it was plainly centre stage from the moment the preliminary issue was agreed. It was and is quite impossible for the court to decide the preliminary issue without deciding whether or not there was a Joint Venture agreement in the first place. Indeed, I originally assumed that it was because this was known to be such an important aspect of the preliminary issue that the statements from Mr and Mrs Solland, which are very extensive, dealt in considerable detail with the original Joint Venture agreement and how that Joint Venture agreement was subsequently varied to a split that gave them 37.5% of the profits made on the sale of the property. There is also a full, if less long, witness statement from Mr Salem dealing with the same matters.

[27]Notwithstanding the centrality of this issue, there seems to have been some doubt as to whether or not any finding in these proceedings as to the existence (or otherwise) of the Joint Venture agreement would be binding on the parties to that agreement, namely Mr Moussa Salem and Mr and Mrs Solland. Mr Lightman devoted some time this morning to his submission that the court could deal with and resolve the preliminary issue without reaching a conclusion as to the existence (or otherwise) of the Joint Venture agreement that would be binding on either the Sollands or Mr Salem. As a result, he said that Mr Salem did not need to be joined as a party, since he would not be bound by the result. For the reasons set out below, I consider that that submission is unrealistic and unworkable.

[28]First, as a matter of law, I consider that, if I had gone ahead and concluded that there was a Joint Venture agreement, as part of the decision-making process required by the preliminary issue, the Sollands would have inevitably argued in their subsequent claim against Mr Salem (for, say, £30 million) that he was estopped from contesting that decision (see the authorities on issue estoppel and the Henderson v Henderson line of cases). On this assumption, they would have argued that, even though Mr Salem was not a party to these proceedings, his evidence on the issue having been expressly considered and rejected, it would be an abuse of process for him to open up the matter again (see Johnson v Gore Wood & Co

[2002] 2 AC 1

). I am bound to say that I consider that such an argument would have had considerable force; on any broad, merits-based judgment, the re-litigation of the same issue, by reference to the evidence of the same witnesses, would probably be regarded as an abuse of process. Similarly, if I had decided on the evidence that there was no Joint Venture agreement, Mr Salem would probably have been able to rely on that as a complete defence to any later claim brought by the Sollands. Accordingly, it is in my view wrong to say that any decision that I reached on the preliminary issue would not in some way or another have been binding on the parties to the alleged Joint Venture agreement. At the very least, I consider that it is probable that such decision would have been binding I have dealt with this point on the assumption that Mr and Mrs Solland, as directors of the claimant company, were so anxious to retain the trial date for financial reasons that they were prepared to argue (no matter how unrealistically) that the answer to the preliminary issue would not be binding on the parties to the alleged Joint Venture agreement. But I am well aware that there is another possible explanation for their stance: that they were hoping to get a favourable result on the point, which was binding on Mr Salem, but without going to the expense of full-blown proceedings against him pursuant to the alleged Joint Venture agreement. .

[29]Secondly, I consider that any alternative analysis is unrealistic and impractical. Let us assume that the dispute as to the existence (or otherwise) of the Joint Venture agreement was debated and resolved in these proceedings, by reference to the witness statements, together with the oral evidence, of Mr and Mrs Solland and Mr Moussa Salem. Could it seriously be suggested that the same issue could then be fought out all over again, by reference to precisely the same witnesses, if and when the Sollands pursued Mr Salem under the Joint Venture agreement in subsequent proceedings? In my view, the answer is plainly No. That would not be a proper use of court resources. A court should never embark on the trial of an issue knowing that, in all likelihood, that self-same issue was going to be re-litigated by the same people all over again at some date in the future.

[30]Accordingly, nobody should be in any doubt that, in my view, the preliminary issue in this case will lead to a decision, binding on all the relevant parties, as to whether or not there was a Joint Venture agreement between Mr Salem and Mr and Mrs Solland. As a result, of course, it follows that Mr Salem has a close personal interest in the outcome of the preliminary issue and that therefore the test in CPR 19.2(2) is fully made out. It may very well be, as canvassed during the course of argument, that Mr and Mrs Solland should also be joined as parties to these proceedings. That, however, is a separate matter which I do not need to decide today.

D2 Should The Application Have Been Made Earlier?

[31]For the reasons that I have already given, I consider that, although the necessary test under CPR 19.2(2) has been made out, that has always been the position. In other words, Mr Salem has always had an obvious and personal interest in the outcome of the preliminary issue. If he felt that he was at risk, that there might be a conflict of interest between the defendant and himself personally, or that he needed to be separately represented in order to safeguard his own best interests, then it was always open to him to make this application. That he failed to do so demonstrates, at the very least, a failure to understand the scope of the preliminary issue and the extent to which he is now at risk of an adverse finding about the existence of the alleged Joint Venture agreement. I consider that to be a problem largely of his own making. In his defence, however, it must be noted that this confusion was apparently shared, at least to some extent, by the Sollands.

[32]The formal application is to join Mr Moussa Salem as a defendant and to adjourn the trial of the preliminary issue. At first sight, I thought that the joinder could be made, but that there was no need for an adjournment. After all, Mr Salem has been closely involved throughout these proceedings. He has attended earlier court hearings, and he has provided disclosure of his own electronic documents with a sensible list of key words for the purposes of the electronic disclosure exercise. Those words included ‘joint venture’ and ‘profit share’. In addition, he has provided a lengthy witness statement. Accordingly, it originally seemed to me that Mr Moussa Salem could be joined, but that need not be at the expense of the trial of preliminary issue.

[33]However, having considered Mr Peto QC’s careful submissions, I have concluded that there is simply too much for Mr Salem and his new representatives to do in order to be able properly to take part in an ongoing trial in relation to these issues. I have to take into account the risk to Mr Salem. He faces a potential claim worth £30 million. Moreover, I also note that: a) Mr Salem’s case is sharply different to that of the defendant on at least one point on the pleadings, so that a separate Defence from Mr Salem is going to be required; b) There is a risk that the evidence put forward by the two parties to these proceedings overlooked or misstated Mr Salem’s own position. The example that has taken up a good deal of court time is his alleged attendance at a meeting on 7th December 2004, a fact on which both the claimant’s evidence and the defendant’s evidence was agreed: everyone said that Mr Salem was there. Once Mr Salem became more closely involved (and leaving aside the criticism that such involvement should have commenced much earlier), it became apparent that this was, at least potentially, a mistake, and that Mr Salem was not at that meeting. Although the importance of that meeting seems to me to have been overplayed, given that it was not a meeting at which anything decisive was allegedly agreed, I understand Mr Peto QC’s submission that, since both Mr and Mrs Solland go into some detail about what Mr Salem said at that meeting, this gives rise to an important credibility point on which he would need to be properly prepared in order to cross-examine.

[34]In addition, Mr Peto QC tells me that, because of the lateness of his instructions, he is simply not ready to represent Mr Salem’s best interests. That seems to me a matter which I am, quite properly, bound to accept from him. I also accept his submissions that he has not yet seen the documents disclosed by the other two parties, and that he considers that further disclosure of documents from the relevant individuals may be required. He also may want to consider calling other witnesses, although I am possibly less convinced that this will be necessary. In the round, I am confident that, in order to represent Mr Salem properly in a claim which may be worth £30 million, Mr Peto QC is entitled to an adjournment.

[35]Accordingly, and with reluctance, it seems to me that the proper outcome of both of these applications is to adjourn the trial. However, the remaining question is whether I ought to do that because of the alleged prejudice to the claimant company if the trial does not go ahead.

D3 Possible Prejudice To The Claimant

[36]It is alleged on behalf of the claimant that if the trial of the preliminary issue is adjourned they would not be able to find further funding thereafter. That seems odd, given that, even if the claimant had been successful on the preliminary issue, there would always have been no automatic entitlement to payment and, if the matter was not resolved by agreement, a further hearing would have been necessary. In any event, this is just an assertion in their solicitor’s witness statement. There is, for example, no evidence about the potential assets of Mr and Mrs Solland themselves as opposed to those of the claimant company. Given the absence of any particulars of how or why this dire result would eventuate, it does not seem to me to be something to which I can give undue weight. It is inappropriate for the court to make decisions based solely on a bald threat of this kind.

[37]However the real difficulty for the claimant is this: whatever the financial position of the claimant company might be, the reason why the trial of the preliminary issue cannot go ahead is something for which the claimant must bear some responsibility. The trial is being adjourned for two reasons. Although both those reasons arise out of applications made against the claimant, their disposal has demonstrated that the claimant’s case is not in order. On the substantive issue (Section C above), the claimant must plead a proper case as to the payment of £1 million which will, amongst other things, involve resiling from their previous pleaded admission. And on the question of the Joint Venture agreement, I have rejected Mr Lightman’s contention that I could have decided the preliminary issue without reaching conclusions that were probably binding on the relevant individuals.

[38]Thus, because responsibility for the adjournment is spread around the parties, (albeit in different percentages), it would be wrong to allow the claimant’s apparent financial difficulties to prevent the case management decisions which are necessary pursuant to the overriding objective. Those difficulties are not a reason to ignore what seems to me to be the only sensible approach to the issues as they now stand. Any other result would cause irredeemable prejudice to the defendant and to Mr Salem.

E SUMMARY

[39]For the reasons I have given in Section C above, the defendant’s application to strike out fails. New pleadings will be required.

[40]For the reasons I have given in Section D above, the application to join Mr Salem as a defendant succeeds. I consider, for the reasons that I have given, that it may well be sensible for the Sollands also to be joined, although that can be dealt with separately.

[41]The trial of the preliminary issue will have to be adjourned so that all the matters noted in this judgment can be sorted out. Further detailed directions and all issues as to costs will be the subject of further submissions.