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Clutterbuck & Paton v Cleghorn [2018] EWHC 2125 (Ch)

Tuesday 14 August 2018

The Claimants’ multi-million-pound claim for damages arising out of a property joint venture agreement relating to prime residential property in Belgravia was dismissed in its entirety following an eleven-day trial involving evidence from nine witnesses.  The detailed judgment contains points of interest relating to:

  • The court’s refusal to permit expert evidence ‘gaps’ to be plugged at the last minute;
  • Guidance on the relevance of previous adverse findings in relation to a witness’s credibility; and
  • The potential impact of failing to call an important witness.

The Defendant was successfully represented by Squire Patton Boggs (UK) LLP and Jonathan Seitler QC and Emer Murphy.

Background

  1. This case concerned the redevelopment of a property in the ultra-prime Cliveden Place in Belgravia (the “Property”). Back in the early 2000s, the Property was separated into four flats and in a dilapidated condition.
  2. The Claimants (a property development duo) owned two of the flats, and an SPV known as Westbrooke purchased the other two. Westbrooke and the Claimants entered into a joint venture agreement (the “JVA”) on 3 August 2006, which provided for the flats to be transferred to Westbrooke, for Westbrooke to purchase the freehold and to redevelop the Property using bank funding and for the eventual sale profits to be split between the parties.  The developer behind Westbrooke (Mr Elliot Nichol) signed the JVA as guarantor of Westbrooke’s obligations.
  3. The redevelopment took a lot longer than envisaged by the parties and the Property was eventually sold in early 2013. No profit was realised and Westbrooke entered into insolvent liquidation.  Mr Nichol had died in the meantime, and after his death the Claimants raised a series of allegations against the representatives of his estate.   In particular, the Claimants alleged as follows:
    • That Mr Nichol had lied to them prior to their entry into the JVA as to the value that the Bank of Ireland would accept as the then-current value of the Property (which had an impact on their share of the sale proceeds);
    • That Mr Nichol caused Westbrooke to breach the terms of the JVA by drawing down an extra £1m of bank funding in early 2008 and paying that money across to Mr Nichol as an ‘equity release’, without the Claimants’ knowledge;
    • That Westbrooke had breached the terms of the JVA by deliberately delaying the redevelopment, and by using an inadequate standard of workmanship, in relation to which the Claimants claimed on Mr Nichol’s guarantee;
    • Finally, that Westbrooke owed the Claimants £50,000 under a side agreement.
  4. The case considered at trial was the remaining element of the Claimants’ £50m claim, the majority of which had been struck out by the Court of Appeal [2017] EWCA Civ 137 because of the Claimants’ failure to comply with the Aldi Stores requirements[1] and raise their allegations against Mr Nichol during earlier proceedings against another alleged joint venturer, Sarah Al Amoudi (see Clutterbuck v Al Amoudi [2014] EWHC 383 (Ch)permission to appeal refused [2015] EWCA Civ 1593).

The judgment

  1. In a detailed judgment handed down on 10 August 2018, following an eleven-day trial in the High Court involving extensive cross-examination of witnesses, the Claimants’ claims were dismissed in their entirety. The Judge found as follows:
    • The alleged misrepresentation had not been made by Mr Nichol;
    • Though the £1m equity release was a breach of the JVA, this claim also failed for two reasons:
      • One, part of the £1m equity release was used to pay the balance of a sum known as the Westbrooke Flats Value. The Judge accepted the Defendant’s submissions that increasing the borrowing to pay this sum was consistent with, and not a breach of, the JVA’s terms on their true construction;
      • Two, the Judge accepted the Defendant’s evidence that Mr Nichol and his estate had contributed more than the £1m equity release (and the interest charged thereon) to the redevelopment of the Property, such that the Claimants suffered no loss;
    • There was no evidence in support of the Claimants’ allegation of deliberate delay, and no expert evidence to establish or quantify the Claimants’ defects claim; and
    • Any agreement in relation to £50,000 was not covered by Mr Nichol’s guarantee in the JVA.
  2. Points of interest in the detailed judgment of HHJ Pelling QC (sitting as a judge of the High Court) include the following.

Expert evidence ‘gaps’ cannot be plugged

  1. The Claimants (who acted in person at various stages, though they retained a direct-access barrister for the trial) had failed to call any expert evidence to support their defects claim and to support their assertion that, had the Property been completed earlier and to a higher standard, it would have sold for more.
  2. To deal with these deficiencies, the Claimants suggested a split trial in closings. This was rejected by the Judge for two reasons:
    • The Claimants had sought such a direction at an earlier case management hearing, this was refused and the resulting order had not been appealed nor had an application been made to vary or set aside that order. The Judge accordingly concluded that “any order for a split trial at this stage would impermissibly undermine the finality principle” (§31);
    • In any event, an order for a split trial would ignore “the fact that [the Claimants] could and should have applied for permission to adduce expert evidence at a much earlier stage in these proceedings” (§32).
  3. The Judge also rejected the Claimants’ attempts to plug the gap in valuation evidence by relying upon property valuations produced at various points during the redevelopment. The Claimants had no permission to rely upon such evidence, it was produced for a different purpose and did not comply with the CPR requirements for expert evidence: see §182-183.
  4. Without admissible valuation evidence, the Claimants’ claims in relation to delay and defects were bound to fail. As the Judge concluded at §203: “Even assuming that I was satisfied that a higher standard of finish was required, I cannot simply pull a figure from the air as to what price might have been achieved with such finishes”.

Previous credibility findings relevant but not decisive

  1. This trial came a number of years after another unsuccessful case brought by the same Claimants, which also related to property joint ventures. In that action, Asplin J (as she then was) dismissed the Claimants’ evidence as not credible[2].  The Defendant in the present action relied upon those findings to support his attack on the Claimants’ credibility.  This led the Judge to hold as follows (at §50):

“it is necessary to remember that it does not necessarily follow from the fact that a witness has been shown to be dishonest or unreliable in a previous case that his evidence in all subsequent cases must be rejected. It is the duty of a judge determining a particular case to reach a conclusion concerning the credibility of the evidence given in that case on the material available to that judge in that case. Conclusions reached in other cases concerning the credibility of a particular witness may be a relevant consideration in reaching such a conclusion but … not necessarily decisive much less conclusive.”

Failure to call a key witness significant

  1. In relation to the Claimants’ allegations that Mr Nichol caused the development to be delayed deliberately, the Claimants failed to call any evidence from the previous contractor on site. This was the case even though the Claimants had issued a number of witness summonses to other witnesses prior to the trial.  This failure was a substantial factor in the Judge’s decision that deliberate delay was not made out.  As the Judge held at §168:

“It was submitted on behalf of [the Defendant] that it would have been open to the claimants to call the principal of [Westbrooke’s] contractor if they had wished to advance such a case [deliberate delay]. They did not do so. That is significant in my judgment given the absence of any evidence from which deliberate collusion between the contractor and the Deceased can be inferred …”

Conclusion

  1. The findings in this case support the tougher stance now taken by the court towards failures by parties to get their cases ready for trial. It is a stark reminder to all litigants that, if you fail to adduce the necessary evidence or make your points at trial, you will lose your opportunity to do so, and lose your case.

 

You can download a copy of the judgment here.

 

[1] [2007] EWCA Civ 1260; [2008] 1 W.L.R. 748;

[2] [2014] EWHC 383 (Ch)