Neutral Citation Number: [2012] EWHC 81 (Ch)
Case No: HC09C00596
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 25/01/2012

Before :

MR JUSTICE MORGAN
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Between :

	(1)	ROSS RIVER LIMITED
(2)	BLUE RIVER LIMITED PARTNERSHIP	Claimants	
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	(1)	WAVELEY COMMERCIAL LIMITED
(2)	PETER BARNETT
(3)	PAUL HARNEY
(4)	WESTBURY PROPERTIES LIMITED	Defendants	

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Mr David Cavender QC and Mr David Caplan (instructed by Mishcon de Reya ) for the Claimants
Mr Nicholas Davidson QC and Mr Malcolm Chapple (instructed by Geoffrey Leaver LLP) for the First, Second and Fourth Defendants

Hearing dates: 13,14,15,18,19,20,21,22,25,26 and 27 July and 4,5,6,7,10 and 11 October 2011
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Judgment

Mr Justice Morgan: 
Heading	Paragraph	
The case in outline	1	
The parties and others involved	7	
The joint venture agreement (“JVA”)	23	
The side agreement	40	
The guarantee	43	
The first supplemental agreement	44	
The second supplemental agreement	45	
The third supplemental agreement	46	
Other matters	48	
The proceedings	49	
The issues	54	
The witnesses	63	
Net Profits:	69	
                   - general remarks	69	
                   - disputes as to revenue	80	
                   - the Financial Proposal	87	
                   - the cost of the freehold	105	
                   - Bradcliffe historic costs	111	
                   - the snooker club	119	
                    - legal fees	125	
                    - management fees	138	
                     - administration costs	148	
                     - Westbury	154	
                     - bank charges and interest	156	
                     - miscellaneous matters	157	
The issues as to the side agreement	160	
The JVA:the alleged implied terms	199	
Implied terms: the law	217	
Implied terms: discussion and conclusions	220	
The alleged fiduciary obligations	231	
Fiduciary obligations: the law	235	
Fiduciary obligations: discussion	256	
Any breach of fiduciary obligations?	264	
Accessory liability	280	
The next steps	283	
APPENDIX I		
APPENDIX II		
APPENDIX III		

The case in outline
1.	 This dispute arises out of a property development carried out by Waveley Commercial Limited (“WCL”) at Bedford Street, Ampthill. The development involved the construction of a supermarket, 5 shops and 17 flats. The part of the development comprising the 5 shops and the 17 flats was known as Oxlet House. 
2.	The development was the subject of an agreement, called “a joint venture agreement”. Ross River Limited (“Ross River”) and Blue River Limited Partnership (“Blue River”) and WCL were parties to the joint venture. Mr Harney, a director of WCL also joined in the joint venture agreement. So too did Mr Barnett, who was described at the trial as a shadow director of WCL. There is a dispute as to the consequences of Mr Barnett and Mr Harney being parties to the joint venture agreement. The joint venture agreement was later the subject of a number of supplemental agreements. There was also an agreement called “a side agreement”. 
3.	The development was completed in around 2007. During the course of the trial, the last outstanding interest in the development was sold by WCL. It is common ground that a sum is payable by WCL to Ross River and Blue River under the joint venture agreement. The parties are very far apart, for a large number of reasons, as to the amount payable. The court is asked in these proceedings to determine the many disputes as to that amount. 
4.	There is a separate issue as to the status of and, if appropriate, the true interpretation of the side agreement. WCL says that the side agreement was a sham. If the side agreement is genuine, there are real difficulties in construing it. 
5.	The sum payable under the joint venture agreement and any sum payable under the side agreement are payable by WCL to Ross River and Blue River. Mr Barnett and Mr Harney are not personally liable to pay the sums which may be due. Ross River and Blue River assert that WCL will be unable to pay very much of the sums due from it. Apparently for this reason, Ross River and Blue River have also sued Mr Barnett and Mr Harney. They are said to be personally liable to Ross River and Blue River under terms to be implied into the joint venture agreement or pursuant to fiduciary obligations which, it is said, they owed Ross River and Blue River. The alleged implied terms and fiduciary obligations are very much disputed by Mr Barnett. Ross River and Blue River have obtained a default judgment against Mr Harney and he took no part at the trial, either as a party or as a witness. In the event, I am not asked to decide anything in relation to Mr Harney’s liability to Ross River and Blue River. In addition to the claims that Mr Barnett and Mr Harney are liable as principals pursuant to implied terms and fiduciary obligations, it is also alleged that they are liable as accessories to various unlawful acts committed by WCL. They are said to be liable for inducing breach of contract, or for conspiracy to injure by unlawful means or for dishonestly assisting WCL to break its alleged fiduciary obligations to Ross River and Blue River.
6.	Mr Cavender QC and Mr Caplan appeared on behalf of Ross River and Blue River and Mr Davidson QC and Mr Chapple appeared on behalf of WCL and Mr Barnett.
The parties and other persons involved
7.	The Claimants are Ross River and Blue River. Blue River is a property development partnership based in the Isle of Man. It was originally called York Development Limited Partnership, sometimes abbreviated to “YDLP”. Mr Brian York was the settlor of a family trust with a corporate trustee. His wife was similarly the settlor of a family trust with a corporate trustee. The corporate trustees are both owned by Tenon (IOM) Nominees Ltd. The two corporate trustees are the limited partners (in unequal shares) in Blue River. Mr and Mrs York are the ultimate beneficiaries in relation to Blue River.
8.	Ross River is the general partner of Blue River. Ross River was incorporated in the Isle of Man on 13th October 2004. Its sole shareholder was originally Tenon (IOM) Nominees Ltd which transferred its share to Tenon (IOM) Corporate Services Ltd on 23rd May 2007.
9.	Both Blue River and Ross River are managed by a corporate nominee in the Isle of Man called RSM Tenon (IOM) Ltd. This company provides fiduciary services, financial management and administration. This company has also provided directors for Ross River. At the material time, they were Mr Brent Thomas and Mr Mark Schofield.
10.	For the purposes of these proceedings, it is not usually necessary to differentiate between Ross River and Blue River. Accordingly, for convenience, I will refer to both Ross River and Blue River, as “Ross River” or “the Claimants” unless I need to distinguish between the two companies.
11.	 Mr Brian York describes himself as a businessman and property consultant. He appears to have started as a building contractor but later expanded into property development. He controls a building company, York Construction (Cambridge) Ltd. He is connected with Ross River and Blue River in the way described above.
12.	Mr Derek Carr was a former HMRC tax inspector and is a chartered tax adviser. He is a partner at Peters Elworthy Moore of Cambridge. Mr York relied upon Mr Carr for advice, not confined to tax matters, in relation to the matters with which this litigation is concerned.
13.	There was some investigation at the trial as to the extent to which Ross River (and Blue River) acted on the direction of Mr York either directly, or indirectly through Mr Carr, and the extent to which Ross River (and Blue River) made their own decisions, albeit having consulted Mr York and Mr Carr and considered any recommendations from them. It is not necessary for me to come to any conclusion on this question for the purpose of deciding the issues before me.
14.	WCL is the First Defendant. WCL was incorporated on 9th December 2004. Its memorandum stated that the company’s objects were to carry on any business that could be conveniently carried on. Mr Barnett is the Second Defendant. Mr Harney is the Third Defendant. On the incorporation of WCL, Mr Harney was the sole director. Mr Barnett became a director of WCL for the first time on 21st November 2008. He accepted in his evidence that at all times he was acting as a shadow director of WCL. Mr Harney resigned as a director on 11th November 2009, after the present litigation had commenced. Mr Harney was initially the secretary of WCL but was replaced as secretary by Mrs Barnett at some time before December 2009; I presume he resigned as secretary at the same time as he resigned as a director. On incorporation, 100 shares were issued, all of them to Mr Harney. It is clear that Mr Barnett and Mr Harney at all times considered that some of these 100 shares were held on trust for Mr Barnett. The Claimants appeared to have understood at all times that 80 of the shares were beneficially owned by Mr Barnett. There is an indication in the documents that there might have been an intention at one time for Mr Harney to own 30 of the issued shares so that Mr Barnett would be the beneficial owner of the other 70 and then, later, they agreed that Mr Barnett would be the beneficial owner of 80 of the shares. In any event, eventually, on 10th April 2008, Mr Harney transferred 80 of the 100 issued shares into the name of Mr Barnett.
15.	Mr Barnett described himself as a property developer with over 30 years experience. In 2003, he moved to Dubai. In March 2007, he moved to live in Spain. He frequently travelled from his home in Dubai and later his home in Spain to deal with his business interests in the United Kingdom.
16.	Mr Harney was described by Mr York as an architect and property developer. Mr York met Mr Harney in 2003. Shortly afterwards, Mr York’s company, York Construction (Cambridge) Ltd bought a development from Waveley Ltd. In 2004, Mr York was involved with Mr Harney in relation to property matters concerning Cambridge City Football Club. Those matters later led to litigation between Ross River and Cambridge City Football Club which was determined by the judgment of Briggs J given on 19th September 2007, reported at [2008] 1 All ER 1004. Mr York told me that he got to know Mr Harney well and that Mr Harney worked for him and his businesses as a property consultant and architect on a number of residential and commercial projects.
17.	Mr Barnett and/or Mr Harney were involved with a number of other companies to which it is relevant to refer.
18.	Waveley Developments Ltd (“WDL”) was incorporated on 22nd March 2004. Its first activity was apparently in relation to a property development at Ashfield Grange, Great Ashfield, Suffolk. Later WDL became involved with a property development at Church Street, Ampthill. Both Mr Barnett and Mr Harney were directors of WDL although Mr Harney ceased to be a director on 19th December 2007. The shares in WDL were owned 50/50 by Mr Barnett and Mr Harney.
19.	Originally, both Mr Barnett and Mr Harney had an interest in Waveley Ltd but from 2003, only Mr Harney had an interest in that company.
20.	Waveley Project Management Ltd appears to have been controlled by Mr Harney and at the material times Mr Barnett did not have an interest in that company.
21.	Bradcliffe Ltd (“Bradcliffe”) was incorporated before the events with which this litigation is concerned. Mr Barnett was the sole director of Bradcliffe and owned 100% of its shares. Bradcliffe owned the freehold of commercial premises at Rose Walk, Ampthill. Those premises were formed by the redevelopment of an old cinema. That property was sometimes referred to as “the old cinema site”. The development consisted of some 8 or so retail properties on the ground floor and a snooker club on the first floor of the building. These properties (or at any rate most of them) were let on leases for varying terms. For some years prior to 2004, Bradcliffe had been engaged in the process of acquiring options in relation to the terms of these leases. The old cinema site was to be part of the development with which this litigation is concerned. Bradcliffe had similarly over the years acquired options on other land interests which needed to be acquired to assemble the site needed for the proposed development. Bradcliffe had incurred various costs in relation to these options and in other respects in pursuing the prospect of the proposed development with which this litigation is concerned. Bradcliffe was later struck off the register of companies and was dissolved on 17th August 2010.
22.	The Fourth Defendant is Westbury Properties Ltd (“Westbury”). This company was incorporated on 8th December 2008 with Mr Barnett as the sole director and shareholder. Mr Barnett set up Westbury specifically so that it could enter into two contracts to acquire interests in the completed Ampthill development.
The joint venture agreement (“the JVA”)
23.	On 23rd December 2004, Ross River (acting as general partner for Blue River, then known as York Development Limited Partnership), WCL, Mr Barnett and Mr Harney entered into a detailed agreement relating to the land at Bedford Street, Ampthill. At the trial, all parties referred to this agreement as “the joint venture agreement” or “the JVA” and I will do the same. Many, if not all, of the express terms of the JVA are relevant to the issues in this case not only for their direct application to the issues in dispute but also because they bear upon issues as to whether it is appropriate to imply terms into this agreement and also as to whether WCL and/or Mr Barnett and/or Mr Harney owed fiduciary obligations to the Claimants. I have therefore decided to set out the full terms of the JVA in an appendix to this judgment (Appendix I). Although the full terms of that agreement are thereby available, I will nonetheless draw specific attention to some of the relevant provisions.
24.	In the JVA, Ross River was described as the general partner of York Developments Limited Partnership, referred to as “YDLP”. WCL was referred to as “the Promoter”. Mr Barnett was referred to as “PCB” and Mr Barnett and Mr Harney were together referred to as “the Guarantors”.
25.	The JVA referred to the Basic Profit which was a fixed sum of £250,000. In relation to the Supermarket Scheme (and in the event this was the relevant scheme) the Development Profit was to be one-third of the Net Profits which were defined by reference to Part II of the Schedule to the JVA. 
26.	The JVA explained that WCL had negotiated the acquisition of the Shell Site, which was to be combined with other land under WCL’s control to allow the Supermarket Scheme to be carried out. Ross River agreed to acquire the Shell Site and the parties had agreed to enter into the JVA “as a joint venture”: clause 2.6. By clause 3.1.1, one of the objectives of the parties was to maximise the profits arising from the development of the Supermarket Scheme. By clause 3.1.6, the parties contemplated that they might be able to agree to sell the whole site to an investment fund, in advance of letting the building contract for the construction of the supermarket, and so that the completed supermarket would then be sold to the fund subject to a pre-agreed lease to a supermarket operator. By clause 3.1.7, another of the objectives of the parties was to share in the profits from the development in the manner provided in the agreement at the earliest practicable time. By clause 4 of the agreement, Ross River was to purchase the Shell Site. By clause 9, Ross River granted to WCL an option to acquire the Shell Site for the Standard Sale Price and the Basic Profit. Ross River could elect to take the Development Profit in place of the Basic Profit. Clause 10.5 dealt with Ross River’s entitlement to be paid the Development Profit.
27.	Clause 11.4 was an express obligation undertaken by the Guarantors, Mr Barnett and Mr Harney. Clause 11.5 was an express obligation undertaken by Mr Barnett. Clauses 11.4 and 11.5 were the only clauses that dealt expressly with the personal position of Mr Barnett and Mr Harney.
28.	Clause 12 dealt with completion of the sale of the Shell Site. Clause 12.3.5 referred to the method and manner of payment of the Development Profit and the possibility of the entitlement to that payment being secured to Ross River. Clause 15 dealt with the determination of various kinds of disputes.
29.	Part II of the Schedule to the agreement dealt with the calculation of Net Profits. Part III of the Schedule dealt with the calculation of the Standard Sale Price.
30.	The JVA was executed by Ross River, WCL, Mr Barnett and Mr Harney.
31.	I was asked by one or other side to this dispute to have regard to certain matters which preceded the entry into the JVA and which were argued to be relevant to the construction of the JVA and/or the dispute as to the implication of terms into the JVA and/or the dispute as to the existence of fiduciary obligations. I will now refer to those matters.
32.	On 1st December 2004, Mr Harney sent to Mr York a file containing Mr Harney’s notes and some up to date background information in connection with the Ampthill development. Mr Harney stressed that time was very short if Mr York’s interests were to become involved. Mr Harney’s notes stated that “a new company” was being formed to acquire the Shell site and to take over the various options and the freehold or freeholds needed to form the site of the intended development. It was stated that the shares in the new company would be owned 80% by Mr Barnett and 20% by Mr Harney.  Mr Harney’s notes then contained a number of further references to “the new co”. The same notes contained the statement:
“Peter Barnett and Paul Harney have been involved in this project for five years and have been and remain fully committed to achieving a successful outcome.”
33.	Mr Harney’s notes were also sent to Ross River’s solicitors on 6th December 2004. At the same time those solicitors were sent draft heads of terms for a development agreement to be entered into by “Newco” and Mr York.
34.	WCL was formed on 9th December 2004 as the new company which would enter into the agreement under negotiation.
35.	On 15th December 2004, the solicitors for Ross River wrote to the solicitors for WCL referring to the documents which were then in draft as being complex and referred to the need for significant negotiations and the need for a high measure of trust and understanding between the parties to reach agreement on outstanding matters. I interpret that comment as referring to the period during which the negotiations were to take place rather than to the period following the execution of a concluded agreement.
36.	The draft agreement prepared by the solicitors for Ross River, and sent under cover of the email of 15th December 2004, showed the counterparties as being Mr Barnett and Mr Harney, rather than a newly formed company.
37.	On 20th December 2004, the solicitors for WCL sent a draft agreement to the solicitors for Ross River. Although the documents are not totally clear on this point, it seems to me to be more probable than not that the draft agreement was to be between Ross River and WCL and that Mr Barnett and Mr Harney were not to be parties to it. That changed the following day when WCL’s solicitors sent a revised draft which included Mr Barnett and Mr Harney as parties and this draft included the drafts of clauses 11.4 and 11.5 of the later completed agreement. A covering email of 21st December 2004 referred to the content of clauses 11.4 and 11.5 of the draft agreement.
38.	Although WCL showed to Ross River, in the course of negotiations, the document which was attached to the completed JVA as the Financial Proposal, there were no specific negotiations about the figures in that document.
39.	It may also be relevant to the issues to note that neither Ross River nor Blue River, nor anyone connected with them, acquired any shareholding in, or directorship in WCL.
The side agreement
40.	On 15th August 2005, Ross River and WCL entered into a document described as a side agreement to the JVA. Mr Barnett and Mr Harney were also named as parties to the side agreement. At the same time, WCL, Mr Barnett and Mr Harney signed a letter addressed to Ross River; the letter was described as a letter accompanying the side agreement. The full text of the side agreement is set out in Appendix II and the full text of the accompanying letter is set out in Appendix III.
41.	I will refer in more detail to the terms of the side agreement when discussing the issues that arise in relation to it. For the present, I will draw attention to the following features of it.
42.	The side agreement identified the parties by repeating the terms of the JVA, although Blue River was described as (“formerly York Development LP”) and “YDLP” became “BRLP”. Mr Barnett is referred to as “PCB” but that abbreviation is not used in the side agreement. The operative terms of the side agreement are between Ross River and WCL although the Guarantors are referred to in clause 4.
The guarantee
43.	The guarantee is contained in the letter dated 15th August 2005, accompanying the side letter of the same date. As stated above, the full text of the guarantee is set out in Appendix III to this judgment. I will refer in more detail to the terms of the guarantee when discussing the issues that arise in relation to it. For the present, I will draw attention to the following features of it. The letter is addressed to Ross River. The obligations are undertaken by Mr Barnett and Mr Harney in favour of Ross River. However, the obligations are to pay specified sums to WCL, rather than to Ross River.
The first supplemental agreement
44.	On 31st October 2005, Ross River, WCL, Mr Barnett and Mr Harney entered into an agreement which was stated to be supplemental to the JVA of 23rd December 2004. This supplemental agreement inserted a new definition of Option Completion Date into the JVA and varied a number of the dates expressed in the JVA. In particular, the date stated in the definition of Promotion Period was changed from 31st December 2005 to 31st January 2006. This had the consequence that the period within which WCL could exercise the option under clause 9 of the JVA to purchase the Shell Site was extended to 31st January 2006. It is not necessary to refer to the other alterations in any more detail. The supplemental agreement then stated that in all other respects the JVA was “ratified” and should continue in full force and effect.
The second supplemental agreement	
45.	On 14th February 2006, Ross River, WCL, Mr Barnett and Mr Harney entered into a second supplemental agreement. This agreement was expressed to be supplemental to the JVA and the supplemental agreement of 31st October 2005. The date in the definition of Promotion Period in the JVA was again changed, this time to 28th February 2006, which extended the time for WCL to exercise the option in clause 9 of the JVA to purchase the Shell Site until 28th February 2006. The second supplemental agreement also recorded the parties’ agreement as to the amount of the Standard Purchase Price (in the event of completion of the purchase of the Shell Site on 28th February 2006) in the sum of £1,571,456 plus VAT. This agreed figure included interest on the sum of £1.3m paid by Ross River for the Shell Site and settled a dispute between the parties as to whether Ross River was entitled to any interest on the £1.3m. WCL had initially contended that the express terms of the JVA did not provide for such interest but later accepted that the parties had intended that interest should be payable and the point was conceded in favour of Ross River. It was provided that apart from the variations effected by the second supplemental agreement, the JVA and the first supplemental agreement continued in full force and effect.
The third supplemental agreement
46.	In or around May 2006, the parties entered into a third supplemental agreement. By clause 1.2 of it, the parties acknowledged that Ross River had provided a short term bridging loan to WCL and that the loan had subsequently been repaid with interest. The loan had been provided to enable WCL to exercise the options to acquire title to the site which was then sold to an investment fund. The agreement acknowledged that a number of significant events had occurred. These included the exercise by WCL of its option to acquire the Shell Site, the payment of the Standard Sale Price to Ross River, the sale of the Shell Site to the investment fund and the fact that Ross River had served an Election Notice under the JVA to take the Development Profit rather than the Basic Profit. The third supplemental agreement then recorded that the references in the JVA to the Alternative Scheme and the Fall Back Option and related definitions no longer applied. This meant, in particular, that clause 11.4 (which had placed an obligation on Mr Barnett and Mr Harney as the Guarantors) was no longer applicable and clause 11.5 (which had placed an obligation on Mr Barnett) had been satisfied.
47.	The third supplemental agreement made a significant change to the commercial terms of the JVA. The definition of Development Profit in the JVA was varied so as to give to Ross River an entitlement of 40% of the Net Profits, rather than the earlier entitlement of one-third. By mistake the third supplemental agreement had stated that the earlier entitlement had been 30% but the parties agree that this agreement was nonetheless effective to increase Ross River’s entitlement to the stated 40% of Net Profits. As before, the third supplemental agreement recorded that save as thereby varied the JVA and the earlier supplemental agreements continued in full force and effect.
Other matters
48.	I will now refer to some other matters relating to the progress of the development of the Ampthill site. On 1st July 2005, WCL signed heads of terms with Waitrose which included a provision for Waitrose to take a 25 year lease of the supermarket to be built upon a part of the development site. On 20th September 2005, planning permission for the development was granted. On 29th September 2005, WCL agreed in principle with Legal & General for the sale by WCL to Legal & General of the supermarket part of the development site, so that WCL would retain title to a part of the site which would be developed to create retail shops on the ground floor with flats above. This part of the development site became known as Oxlet House. As recorded in the third supplemental agreement, WCL exercised its option to acquire the Shell Site from Ross River and later completed that acquisition, paying Ross River the Standard Sale Price, whereby Ross River received reimbursement of the sums it had expended on the Shell Site, plus interest. WCL also completed its assembly of the entirety of the site needed for the development of the supermarket and the smaller development known as Oxlet House and on 7th March 2006, WCL completed its sale of the supermarket part of the site to Legal & General. On 10th August 2007, practical completion of the development of Oxlet House was achieved so that the retail shops and 17 flats were available to be let and sold. Beginning in late 2007, the property market slowed down significantly and there was considerable delay in letting or selling the parts of Oxlet House. Eventually, each of the five shops was let on an occupational lease. Some of the flats were sold on 125 year leases and those that did not initially sell on long leases were let on assured shorthold tenancies. Eventually, all of the flats were sold with the last of them (Flat 13) being sold by WCL to Ross River during the course of the trial. The freehold reversion in Oxlet House was also sold. The result is that by the time this judgment is given, all of Oxlet House will have been sold and the proceeds of sale will have been received by WCL.
The proceedings
49.	The proceedings in this case were issued on 27th February 2009. For some time prior to the commencement of proceedings, Mr York on behalf of the Claimants had become increasingly concerned about the rate of progress, or lack of it, in relation to the sales of the completed development and the lack of information provided to him by Mr Barnett and Mr Harney. He became increasingly suspicious of Mr Barnett’s actions and motives. Mr York on behalf of Ross River offered on more than one occasion to buy the completed development but his offers were declined. Mr Barnett became increasingly hostile to communications he received from Mr York. Eventually in December 2008, Mr Barnett caused WCL to enter into three contracts to sell various interests in the completed development to himself or to a company which he formed for the purpose of entering into such contracts. Thus, on 1st December 2008, WCL contracted to grant to Mr Barnett an overriding lease of the five retail shops. The contract provided that the price payable would be the average of two valuations provided by valuers selected by WCL. On 8th December 2008, Mr Barnett caused Westbury to be incorporated; he was its sole shareholder and sole director. On 10th December 2008, WCL contracted to grant to Westbury a lease of the 10 unsold flats in Oxlet House. As with the earlier contract of 1st December 2008, this contract provided that the price payable would be the average of two valuations provided by valuers selected by WCL. On 23rd December 2008, WCL contracted to sell to Westbury the freehold of Oxlet House. As before the purchase price was to be the average of two valuations provided by valuers selected by WCL. Mr Barnett and Westbury registered unilateral notices in relation to these three contracts against WCL’s registered title to Oxlet House. Mr Barnett did not tell Mr York what he had done in relation to these three contracts. Mr York found out about the contracts when his solicitors carried out a search of WCL’s registered title and discovered the unilateral notices. Proceedings followed on 27th February 2009. The Defendants were WCL, Mr Barnett, Mr Harney and Westbury.
50.	These proceedings began, and have continued throughout, against a background of mistrust and suspicion by Mr York of Mr Barnett and of hostility on the part of Mr Barnett to Mr York. The pleadings have been amended many times. I permitted further amendments to the Particulars of Claim in the course of the trial and, indeed, in the course of closing submissions. The Particulars of Claim have now been amended 5 times. It is not necessary to attempt to describe the various cases that have been put forward by Ross River in the course of these proceedings. I will in due course identify what I understand now has to be determined.
51.	At an early stage in the proceedings, WCL entered into undertakings to the court that it would not, until further order, dispose of any interests in Oxlet House. This has meant that there have been repeated applications to the court during the course of these proceedings to permit sales of various interests and, as I have indicated, all interests in Oxlet House have now been sold.
52.	At quite a late stage in these proceedings, on 2nd November 2010, the Claimants applied for a worldwide freezing order against Mr Barnett and a domestic freezing order against WCL and Westbury. In the course of that application, the parties served a considerable volume of evidence. In the event, on 16th February 2011, the application was dismissed by consent with the costs being the First, Second and Fourth Defendants’ costs in the case.
53.	There is one other matter in relation to the procedural history which I ought to mention. Mr Harney did not file a Defence to the claim against him. On 11th November 2009, Master Price ordered that Mr Harney, being in default of Defence, must pay the Claimants “an amount which the court will decide and costs”. Later (the date does not appear on the order in the bundle before me, but it must have been before 27th January 2010), it was ordered that “the assessment of damages” in respect of the Claimants’ claims against Mr Harney be adjourned until the trial of the action or until further order of the court. Since then, Mr Harney has played no part in these proceedings. As I understand it, the amendments to the Particulars of Claim since 11th November 2009 are not relied upon as effective as against him. Mr Harney did not attend the trial either as a party or as a witness. In the course of their closing submissions, the Claimants asked me to make orders against Mr Harney which were not claimed in the Claim Form and which were not the subject of the default judgment. They later withdrew that suggestion. In the end, they did not ask for any order of the court in relation to any matter as against Mr Harney. In particular, I was not asked to assess damages pursuant to the default judgment of 11th November 2009.
The issues
54.	At the beginning of the trial, the Claimants provided a list of the issues which they said were the issues which were to be tried. The Defendants did not disagree with this list of issues. I will attempt at this stage to summarise the issues and separate them into claims against WCL and Mr Barnett. As I have indicated, I am not required to try and determine the claims against Mr Harney. Further, although the contracts made by WCL with Westbury were an important trigger to the commencement of these proceedings, and although the list of issues refers in one or two places to a claim against “the Defendants”, I did not understand the claim as presented by the Claimants to seek any relief against Westbury. The Claimants’ solicitors said in their letter dated 30th June 2011 to the Defendants’ solicitors that the claim against Westbury had “already achieved its end” in that no interest in Oxlet House had been sold to Westbury and all interests have now been sold elsewhere. Accordingly, the Defendants against whom the Claimants are now seeking substantive relief seem to me to be restricted to WCL and Mr Barnett.
55.	I can summarise the issues to be tried as follows:
(1)	Did the JVA contain the implied terms alleged by the Claimants (these terms, if they were to be implied, would impose contractual obligations on WCL and also on Mr Barnett)?
(2)	Did WCL and Mr Barnett owe to the Claimants fiduciary duties in relation to the development the subject of the JVA?
(3)	Is the side agreement of 15th August 2005 enforceable in accordance with its terms or is it a sham and/or should it be rectified?
(4)	Is the guarantee of 15th August 2005 enforceable in accordance with its terms or is it a sham and/or should it be rectified?
(5)	If the side agreement is enforceable in accordance with its terms, what sum are the Claimants entitled to under it?
(6)	Were the Claimants induced to elect to receive Development Profit in place of the Basic Profit by reason of misrepresentations made by WCL and/or Mr Barnett and/or Mr Harney? (This issue, if relevant would give rise to a large number of sub-issues but for reasons which I will explain in due course, I will not now refer to those possible sub-issues).
(7)	What is the true level of Net Profits under the JVA? (The Claimants have identified a large number of sub-issues under this heading; I will refer to the detail of these matters when I later discuss the issues arising as to Net Profits under the JVA).
(8)	Did WCL and/or Mr Barnett break the obligations imposed by the implied terms referred to above?
(9)	Did WCL and/or Mr Barnett break the fiduciary obligations referred to above?
(10)	Did Mr Barnett procure and/or induce WCL to commit breaches of the JVA?
(11)	Did Mr Barnett dishonestly assist WCL to break its fiduciary obligations to the Claimants?
(12)	Did WCL and/or Mr Barnett (and/or Mr Harney) conspire to cause loss to the Claimants by unlawful means?
(13)	Are WCL and/or Mr Barnett liable to compensate WCL in damages and, if so, what is the quantum of damage?
(14)	Are WCL and/or Mr Barnett liable to account to the Claimants for any profits made or benefits received in breach of fiduciary duty?
56.	The pleadings and the witness statements and the cross-examination at the trial fully explored the issue, referred to at sub-paragraph (6) above, as to whether the Claimants were induced to elect to receive Development Profit in place of the Basic Profit by reason of misrepresentations made by WCL and/or Mr Barnett and/or Mr Harney. This issue involves a large number of sub-issues such as whether representations were made, whether any such representations were misrepresentations, whether any representations were made innocently or negligently or fraudulently and whether any such misrepresentations induced the Claimants to elect for Development Profit.
57.	However, the Claimants throughout recognised that if the Net Profits exceeded a certain figure, and they were admittedly entitled to 40% of Net Profits, then they would be better off having elected to take Development Profit, rather than having chosen to take only the Basic Profit of £250,000. The Claimants’ primary case was that the figures I should find in relation to Net Profits would produce the result that they had suffered no loss, but instead had received a considerable benefit, by having elected for Development Profit. If that were to be the result, then the Claimants would have no claim for damages for misrepresentation. In closing submissions, the parties agreed that in this judgment I should determine the other issues but that I should not determine the issue in sub-paragraph (6) above or any of the many sub-issues to which it gave rise. I indicated that I would proceed on this basis and, in addition, I would not make findings of fact on those matters and, in particular, that I would not rely upon any  possible findings of fact when considering issues as to the credibility of witnesses for the purposes of deciding the other issues which arise. I explained to the parties that I felt that I could decide issues as to the credibility of witnesses without having to rely upon, and without allowing myself to be influenced by, the matters relating to misrepresentation which I was, at this stage at least, leaving undecided. Following the handing down of judgment in this case, the parties will then be in a position to indicate to me whether they believe that the issue of misrepresentation will ever need to be determined.
58.	The Claimants’ list of issues raised a further issue but one which, it was accepted, only arose between the Claimants and Mr Harney. In closing submissions, the Claimants stated that they did not ask me to determine that issue or grant relief against Mr Harney in relation to it.
59.	Accordingly, the claims against WCL seem to me to amount to this. The principal claim relates to claims in debt under the JVA and the side agreement. There are also claims that WCL was in breach of implied terms of the JVA and in breach of fiduciary obligations owed to Ross River. In terms of substantive relief against WCL, these claims would seem to add little to the prospect of the Claimants recovering monies from WCL. The same can be said about the claim that WCL was a party to an actionable conspiracy (with Mr Barnett and Mr Harney) against the Claimants. However, I recognise that the claim that WCL acted in breach of contract and in breach of fiduciary obligations would be relevant if it became necessary to consider whether Mr Barnett was liable as an accessory in tort or in equity in relation to those alleged breaches.
60.	The claims against Mr Barnett seem to me to amount to the following. Mr Barnett is sued as a principal and also as an accessory. As a principal, it is said that he owed contractual obligations pursuant to terms to be implied into the JVA and that he also owed fiduciary obligations to the Claimants. As an accessory, it is said that he is liable in tort for procuring and/or inducing breaches of contract by WCL and for conspiring with WCL (and with Mr Harney). In equity, it is said that he dishonestly assisted WCL to commit breaches of its fiduciary obligations to the Claimants.
61.	The background to these claims against Mr Barnett personally is that the Claimants assert that WCL does not have any funds with which to pay its debts, or any damages, to the Claimants. The Claimants say that this state of affairs was brought about by Mr Barnett in circumstances where he is liable, in contract or in tort in or in equity, for the resulting loss to the Claimants. As a practical matter, the Claimants say that they only have a prospect of being paid anything in this case if they can establish liability on the part of Mr Barnett and can enforce any judgment obtained against him.
62.	I think that I should consider, in the following order, the many issues arising:
(1)	the issues in relation to the Net Profits;
(2)	the issues in relation to the side agreement and the guarantee;
(3)	the issues as to the terms to be implied into the JVA;
(4)	the issues as to the alleged fiduciary obligations;
(5)	the issues as to breaches by WCL;
(6)	the issues as to breaches by Mr Barnett of any liability as a principal;
(7)	the issues as to any liability of Mr Barnett as an accessory in tort or in equity;
(8)	the remedies which might be granted.
The witnesses
63.	Mr York was not “a details man”. He was not always able to describe the detail of the arrangements which were entered into this case. Subject to that, I find that the evidence he gave was generally reliable. He was cross-examined about who in practice exercised control over the affairs of Ross River and Blue River and whether that control was exercised in the Isle of Man or elsewhere. Those questions might be material as to the tax position of Ross River and Blue River and would be relevant if I was required in this judgment to make findings of fact as to reliance in relation to the alleged misrepresentations. However, I find that those matters are not of any significance in relation to the issues which I have to deal with in this judgment.
64.	Mr Carr was “a details man”. As with Mr York, he was cross-examined about the reality as to the persons exercising control of Ross River and Blue River. As already explained, I need not deal with those matters in this judgment. Subject to any reservations which I might have about Mr Carr’s evidence on those matters, I find that this evidence to me was generally reliable.
65.	It is not necessary to discuss the evidence given on behalf of the Claimants by Mr Thomas and Mr Farnworth.
66.	Mr Barnett was potentially an important witness. He had played an important role, perhaps the most important role, in relation to the development which was the subject of the JVA both before the parties entered into the JVA and at all times thereafter. In the absence of Mr Harney as a witness, he was the only witness who might have been able to deal with matters of detail in relation to the implementation of the development. Unfortunately, I am unable to place much weight on the evidence given by Mr Barnett unless it is corroborated by another witness whom I find to be reliable or it is supported by the documents. There are several reasons for this assessment of Mr Barnett. First, it was clear that he has very low standards of honesty in relation to some of his business dealings; I have in mind his involvement in relation to Flat 12 (and in particular his action in cheating the mortgage lender in that case) and his misuse of WCL’s VAT returns. Secondly, he had to admit that he had fabricated documents in this case. In some of the cases of fabricated documents, he appeared to be trying to re-create documents which he believed had been lost but in others he was creating documents in order to mislead the court as to what had actually occurred. Thirdly, parts of his evidence were contradicted by the contemporary documents; this particularly applied to his evidence in relation to the negotiations for the side agreement.
67.	The Claimants made a sustained attack on the credibility of Mr Barton, the solicitor at Williams & Co who acted for WCL and Mr Barnett. There are undoubtedly reasons to be careful with Mr Barton’s evidence. He was a friend of Mr Barnett and must have appreciated the depth of Mr Barnett’s hostility to the Claimants. Further, Mr Barnett had provided Mr Barton with a great deal of work as a solicitor over the years; he was one of Mr Barton’s core clients. Yet further, Mr Barton had behaved wrongly in allowing himself to be used by Mr Barnett to cheat the mortgage lender in relation to Flat 12 and anyone relying upon the price stated for Flat 12 in its registered title. As against that, the evidence from Mr Barton which is of principal relevance in this case relates to the fee he charged WCL for his legal work. In relation to that evidence, I do not think that he was influenced in the amount that he charged by Mr Barnett’s present hostility to the Claimants. Furthermore, I think that Mr Barton now fully appreciates how unwise he was to allow himself to be used by Mr Barnett in relation to Flat 12 and that awareness was likely to have brought home to him that, when he gave his evidence, he should make sure that he gave his evidence in a fair and reliable way.
68.	Mr Saunders gave evidence as to the arrangements he had made with Mr Barnett in relation to an option to acquire the lease of the snooker club which was operated by Mr Saunders. I find that I am able to accept his evidence which is in any case borne out by what appear to be reliable documents.
Net Profits: general remarks
69.	Under clause 10.2 of the JVA, Ross River was entitled to elect to take Development Profit rather than Basic Profit. Ross River did so elect. Clause 10.5 provides that the Development Profit will be payable by WCL to Ross River “at such times and in such manner as the parties may agree consistent with the Objectives but in the event of any disagreement as determined by the Expert Accountant pursuant to Clause 15 … ”. The parties have not agreed the times or the manner for payment of the Development Profit. Further, any issues between the parties as to the times or the manner for payment have not been referred to the Expert Accountant pursuant to clause 15 of the JVA.
70.	Development Profit was defined as 40% of Net Profits, following the variation of the JVA by the third supplemental agreement. Net Profits means the sum calculated in accordance with the principles expressed in Part II of the Schedule to the JVA. Paragraph 1 of Part II of the Schedule refers to Net Profits being calculated in accordance with certain principles, policies and Accounting Standards and GAAP. Part II of the Schedule then gives further direction as to the appropriate calculation. Paragraph 5 of Part II states that if the parties fail to agree upon the amount of the Net Profits, then the same is to be determined by the Expert Accountant pursuant to clause 15 of the JVA. Clause 15 deals with the determination of disputes. The JVA provides that the amount of the Net Profits is to be determined by a chartered accountant with certain specified experience. The accountant is to act as an expert and not as an arbitrator. The expert’s decision is to be final.
71.	The amount of Net Profits has not been referred to an accountant for determination pursuant to clause 15 of the JVA. Further, until recently, when the last part of Oxlet House was sold, an accountant could not have made a final determination of the amount of the Net Profits.
72.	Notwithstanding the clear provisions of the JVA, the Claimants have asked the court to determine the amount of Net Profits. The case as pleaded by the Claimants seeks a declaration as to the amount of Net Profits: see paragraph 56P of the most up to date version of the Particulars of Claim. That paragraph also asks that in so far as such a declaration cannot be made at the time of judgment that the court determine the position up to that time and make further declarations as to how certain matters should be treated. By paragraph 56Q of that pleading, the Claimants seek an order that WCL do pay to Ross River the proportion of Net Profits due to it. These pleas are carried forward into the Prayer for Relief.
73.	There are some obvious differences between the amount of Net Profits being calculated by the court rather than by an accountant under clause 15 of the JVA. These include the following:
(1)	the court does not have all of the expertise of an experienced accountant; although I heard evidence from two accountants, they were not called to give me opinion evidence on matters of accountancy principles or polices or Accounting Standards or GAAP; they were described as “forensic accountants”; they had investigated the facts and the relevant books and records and presented their understanding of what the underlying facts of the case were;
(2)	the court can only act on evidence which is admitted in accordance with the established rules of evidence; an expert accountant acting under clause 15 of the JVA is not so restricted; in particular, he is entitled to take account of his own expertise and of matters that are not proved in evidence before him;
(3)	the definition of Net Profits may involve the exercise of judgment; the parties had contracted for that judgment, on accountancy matters, to be made by an accountant not by a judge;
(4)	the determination of the expert accountant was agreed to be final; the decision of the court will not be final in that way but will be subject to the possibility of an appeal.
74.	The Defendants might have considered objecting to the Claimants’ suggestion that any issues as to the Net Profits should be determined by the court. They could have said that the contract provided for the question to be determined by an expert accountant; that the question was not an objective matter of fact which could be determined by a court but rather was a question of judgment requiring accountancy expertise and which, contractually, could only be determined by the agreed method. If the Claimants had responded that the expert did not have exclusive jurisdiction in relation to matters of law (see, for example, the discussion in the recent case of Barclays Bank plc v Nylon Capital LLP [2011] 2 Lloyd’s Rep 347), there would have been considerable scope for argument as to whether all, or even any, of the disputes between the parties as to the amount of the Net Profits raised matters of law. If the Claimants had said that the court had a residual discretion to decide a matter in dispute notwithstanding the parties’ contract as to the mode of determination, there would have been a strong argument that there was no particular reason why the court should take from the Defendants, against their will, the benefit of the contract regulating the mode of determination.
75.	However, the Defendants do not appear to have asserted their entitlement to have the amount of Net Profits determined by an expert. When the matter came before the court on 16th February 2011, the Claimants told the judge (Peter Smith J) that the parties were agreed on the directions which should be given for the trial of this claim save that the Defendants had suggested that there be an accountancy witness called by each side, whereas the Claimants suggested that there should be a single accountancy witness. On 16th February 2011, the learned judge ordered that each side could call its own expert in the field of forensic accountancy. The court’s order directed that the experts should be instructed to calculate Net Profits. The order made further detailed provision as to how the experts were to do so.
76.	In accordance with the order of 16th February 2011, the Claimants have served a detailed report from a forensic accountant, Mr Jeffrey Davidson. His report sets out his findings and his calculation of Net Profits. The Defendants have served a detailed report from a forensic accountant, Mr Keith Tuffin. His report sets out his findings and his calculation of Net Profits. In accordance with further directions from the court, these two accountants have met and have agreed a statement setting out what they have been able to agree and the many matters on which they are not agreed.
77.	When the Claimants opened their case at the trial, they stated that one of the issues to be determined by the court was the amount of Net Profits. The written opening on behalf of the Defendants, after referring to the contractual provisions as to determining that matter, said that the contractual mechanism had been “wrecked” by the course taken in these proceedings. The written opening then appeared to accept, reluctantly, that the parties had ended up with the expensive method of litigation with expert witnesses. The trial then proceeded with the parties calling evidence as to the amount of the Net Profits. In their closing submissions, the Claimants made detailed submissions on the findings I should make as to the many issues as to the amount of the Net Profits. So too did the Defendants.
78.	In the course of their closing submissions, the Defendants suggested that in certain respects I should not determine the amount of the Net Profits but that I should make partial findings on matters in dispute and provide for further matters to be determined some other way, for example, by referring the reasonableness of certain legal fees to be determined by a costs judge.
79.	It seems to me it is too late for the Defendants to invoke the contractual provisions as to determination of the amount of the Net Profits. The parties have committed themselves to procedural directions and a trial at which the court has been asked to determine that amount. In relation to sums claimed as deductible expenditure, unless the sum is the subject of a binding agreement (as the Defendants say, in some cases, that it is) the burden of proof is on the Defendants. If it should transpire that the Defendants have not done enough to prove a particular matter of fact, it does not seem to me to be right to allow the Defendants to have a second shot in a different forum. My conclusion is that I have to decide the issues of fact, and any issues of law, as to the amount of the Net Profits on the evidence led before me and applying the usual rules as to the burden of proof.
Net Profits: disputes as to revenue
80.	To recap, by clause 10.5 of the JVA, Ross River is entitled to be paid the Development Profit which is, in the events which have happened, 40% of Net Profits which is to be calculated in accordance with the principles expressed in Part II of the Schedule to the JVA. Paragraph 4 of Part II of the Schedule states that Net Profits shall be the difference between all revenues received from the disposal of the Composite Site and the costs fees and expenses incurred in achieving such revenues calculated in accordance with the provisions of Part II of the Schedule. The first two disputed items concern revenues said to have been received by WCL. The remaining disputed items concern costs fees and expenses said to have been incurred by WCL.
81.	The first matter in dispute relates to the revenue received by WCL in relation to the sale (by the grant of a long lease) of Flat 12, Oxlet House. There is no dispute of fact as to how much was actually received by WCL in this respect. The sum received by WCL was £140,000. WCL accepts that the receipt of £140,000 should be added to the revenues it has received from the development.
82.	Ross River contends that the sum to be brought into account as revenue received by WCL in relation to Flat 12 should be £189,500. Ross River points to a number of documents which use this figure. The lease of Flat 12 was granted to Mr Barnett. The flat was purchased as a residence for his son. In relation to Flat 12, there was an agreement for lease, a lease and an application for first registration of the leasehold title and all of these documents stated that the premium for the lease was £189,500. When the lease was registered at the Land Registry the registered title stated that the price paid for the lease was £189,500. Mr Barton of Williams & Co acted for WCL, for Mr Barnett and for National Westminster Home Loans Ltd, who advanced £142,450 to Mr Barnett to enable him to purchase the lease of the flat. The lender had agreed to advance that sum to Mr Barnett in July 2008 in the belief that the purchase price was to be £189,500 and the value of the flat was estimated to be £180,000. On 28th August 2008, Mr Barton signed a certificate of title for the use of the lender; the certificate stated that the price to be stated in the lease was to be £189,500. Mr Barton also prepared a completion statement in relation to this transaction. The statement referred to a sale price of £189,500. The statement also referred to the receipt by WCL of £140,000 and it bridged the gap between the higher and the lower figure by referring to a “cashback” of £49,500.
83.	Ross River correctly points out that WCL, Mr Barnett and Mr Barton were parties to statements which knowingly misled the lender about the true position. Others who might have consulted the registered title for evidence of the sale price of the flat might also have been misled. Mr Barnett, and to a lesser extent Mr Barton, sought to justify these misleading statements. In my judgment, they were not justified. It is not necessary for the purposes of this judgment to discuss what recourse the lender might have as a result of being misled. Nor is it necessary to discuss what action should be taken against Mr Barton for his involvement in this matter.
84.	The question for me is as to the amount of the revenue received by WCL on the sale of Flat 12. In my judgment, as a matter of fact, WCL received £140,000 and that is the correct figure which should be brought into account. The fact that WCL misrepresented the true position to the lender and to the Land Registry does not alter the true position as between Ross River and WCL.
85.	Ross River does not argue that the sale at £140,000 was an undervalue. There was expert evidence before the court from a valuer instructed by each side which establishes that the sale was not at an undervalue. 
86.	The second item of alleged revenue which is in dispute is the sum of £8,648 in relation to service charges said to have been received by WCL from lessees of Oxlet House. There was very little evidence or explanation given in relation to this item. Mr Davidson, the forensic accountant called on behalf of Ross River said that this figure (or sums totalling this figure) appeared in the SAGE accounting records of WCL. This sum was also shown in the accounts which were prepared for WCL by a firm of accountants, Collett Hullance. There was no real explanation given as to why this sum should not be regarded as revenue to be brought into account. Mr Tuffin the forensic accountant called on behalf of WCL stated in the Joint Statement prepared by the two forensic accountants that the sum was excluded because “they have not been paid to [WCL]. Defendant confirmed debts transferred to managing agent”. This item was not dealt with in the closing submissions on behalf of WCL. So far as I have been able to find, there was no evidence given by a witness for WCL which explained the circumstances behind the alleged transfer of debts to WCL’s managing agent. In my judgment, in view of the fact that this sum is regarded as a receipt or at least a receivable in WCL’s accounts and the lack of any evidence from WCL on this matter, this item should be brought into account.
Net Profits: the Financial Proposal
87.	I now turn to consider the various disputes as to the costs fees and expenses which are to be deducted from the revenues of the development in order to calculate Net Profit. Before considering the evidence as to the individual sums in dispute, it is necessary to address the difference between the parties as to the function of the Financial Proposal which is annexed to the JVA.
88.	In my judgment, the function of the Financial Proposal is to be determined as a matter of the construction of the JVA. As it happens, there was no real discussion about the detail of, or the function, of the Financial Proposal before the parties entered into the JVA. There was some evidence as to what the parties said to each other after the JVA as to the relevance of the figures in the JVA. This evidence tended to support the idea that the parties had not intended that certain figures in the Financial Proposal should be treated as fixed. However, as with all questions of construction, the court must have regard to the terms of the document which falls to be construed and should not take account of later events or statements unless they give rise to a variation of the original agreement or to an estoppel, and neither of these has been alleged in relation to this point.
89.	The provisions of the JVA which are relevant in the present context are the contents of the Financial Proposal itself, the definitions of Financial Proposal and of Net Profits, clauses 3.1.1, 3.1.4, 7.5, 7.7, 10.3, 10.5, 11.5, and paragraphs 2, 4 and 5 of Part II of the Schedule. I will make brief comments on some of the features of those provisions.
90.	The heading to the Financial Proposal refers to costs and to projected costs; it also refers to certain costs incurred to 1st November 2004. Those costs are later stated in the round figure of £217,000 and are not broken down in the Financial Proposal. Nor were they broken down in any discussions between the parties prior to the JVA. The Financial Proposal then refers to various costs or prices for various interests to be acquired. From the descriptions used, it would appear that some of these costs or prices were not fixed whereas with others, there may have been more predictability as to the cost or price which would be involved.
91.	The definition of Financial Proposal states that the proposal has been prepared by the Promoter. The definition states that the proposal may be modified and updated from time to time; that suggests that some (at least) of the figures are not to be considered as fixed. The intention seems to be, in relation to such figures, that they might be replaced by actual different figures by reference to what later actually occurred. The definition then refers to the proposal setting out figures so far as they are available at the date of the JVA. That suggests that some of the figures might be reliable as regards likely future costs; it is even possible that the parties considered that some of the figures might be regarded as fixed. Finally, the definition states that the figures in the proposal (but subject to modification) are “the base costs to be used for the purposes of calculating Net Profits”. This suggests that the Financial Proposal might play some part in the calculation of Net Profits; it seems to have been envisaged that the calculation might not be simply a calculation of revenues minus expenses, based upon the actual facts as they later emerged.
92.	Clause 3.1.1 refers to the objective of maximising profits; that would normally require keeping expenditure to the minimum level. Clause 3.1.4 refers to the objective of acquiring outstanding interests in the development site.
93.	The Financial Proposal is referred to in clause 7.5. In that clause, the Financial Proposal is meant to be a constraint on what WCL is able to pay for the relevant interest. It seems to have been considered that the Financial Proposal set out, at least in relation to some of the figures used, prices which had been previously negotiated with third parties. In other cases, where an acquisition cost had not been negotiated with a third party, then the parties had to agree in writing on the cost of acquiring an outstanding interest.
94.	Clause 7.7 refers to fees and expenses incurred by WCL in respect of its obligations under clause 7, therefore including clause 7.5. It may be that the reference to “fees and expenses” was intended to refer to things like professional fees rather than the actual price paid for the interest in land acquired under clause 7.5, but the words could be given a wider meaning to include such prices. Such fees and expenses were then to be added to “the base costs”; this might have been intended to be a reference to costs which included the price for the relevant interest in land.
95.	Clauses 10.3 and 10.4 deal with the time limit for Ross River to make an election to take Development Profit. It refers to Ross River having reports and costings and information in relation to the proposed development. This indicates that Ross River was expecting to have costings in relation to some at least of the costs involved.
96.	Clause 11.5 imposes an obligation on Mr Barnett, as the person controlling Bradcliffe, to procure Bradcliffe to transfer to WCL the benefit of the options and contracts which it may have to acquire parts of the development site and also to transfer its freehold in a part of the site. These transfers were to be in accordance with clause 7.5 which referred to certain costs identified in the Financial Proposal.
97.	Paragraph 2 of Part II of the Schedule stated that “regard will be had to the base costs referred to in the Financial Proposal as may be revised from time to time”. This phrase shows that some at least of the figures in the Financial Proposal were open to revision. This paragraph does not spell out the circumstances in which the costs might be revised but it seems likely that the parties intended that figures would be revised to the costs actually incurred in place of projected costs. The paragraph continues by referring to a number of specific matters where the relevant costs should be included in the calculation. These matters were sometimes defined by reference to reasonableness.
98.	Paragraph 4 of Part II of the Schedule is of central importance. It states that Net Profits are to be, in effect, revenues minus costs, fees and expenses incurred and calculated in accordance with the foregoing provisions. By paragraph 5 of Part II of the Schedule, a failure to agree on the amount of Net Profits is to be resolved by the determination of the independent expert.
99.	When considering the above provisions one by one, I have expressed tentative views as to what each provision appeared to indicate. I now must draw the strands together and decide on the intended contractual function of the Financial Proposal.
100.	Some matters are reasonably clear. In my judgment, the overall intention of the parties was that WCL would incur costs and could deduct those costs from the revenues of the development for the purpose of calculating Net Profits. In general, WCL could be required to produce evidence that it had incurred the relevant costs. In relation to some of the costs, the sums expended had to meet an express test of reasonableness; in relation to some other costs, it is probable that it is to be implied that costs are to be recovered only to the extent that they are reasonable. If WCL did not in the end incur a cost at all, or incurred a cost at a level below the figures shown in the Financial Proposal, then only the lower (if any) figure could be brought into account.
101.	Many of the figures in the Financial Proposal were projected costs and some only of those costs had been negotiated. The difference between a negotiated cost and one not yet negotiated was important for the purposes of clause 7.5. But in either case, in my judgment, if the figure stated in the Financial Proposal for a projected cost was not actually expended, then the actual cost was to be used rather than the figure in the Financial Proposal.
102.	The real problem in the present case in relation to the Financial Proposal arises in relation to the matters concerning Bradcliffe. This company owned the freehold of a part of the site. It also had the benefit of options to acquire outstanding interests (mostly leaseholds) in relation to parts of the site. The parties knew that WCL had to procure Bradcliffe to bring those interests into the development. Mr Barnett, who controlled Bradcliffe, contracted to procure that result and, further, to do so in accordance with clause 7.5. Although clause 7.5 referred to using “reasonable commercial endeavours”, while Mr Barnett controlled Bradcliffe, it must have been contemplated that he would procure transfers of rights from Bradcliffe to WCL at no more than the figures shown in the Financial Proposal. However, those figures had an additional role in this respect. In my judgment, if Mr Barnett procured Bradcliffe to transfer its rights for exactly the figures shown in the Financial Proposal, it would not be open to Ross River to say that WCL had paid too much for those rights.
103.	The Financial Proposal also referred to costs, including option and planning costs, incurred up to 1st November 2004. These costs had not been incurred by WCL. So far as they had been incurred at all, they had been incurred by Bradcliffe. In addition, the Financial Proposal included Bradcliffe’s freehold interest at a figure of £450,000. In principle, the parties could have dealt with historic costs and the value of Bradcliffe’s interests in different ways. They could have taken the view that historic costs would be reflected in the present value of Bradcliffe’s interests. For example, if planning costs had increased the value of Bradcliffe’s land by giving it a hope value, then that value should be paid as part of the price of the land but the cost of producing that value should not be paid on top. Further, as regards options, a number of approaches might have been considered. One could value the benefit of the options and require or allow WCL to pay that value to Bradcliffe. If one adopted that approach, the historic costs in securing options should not be added on top of that value. When valuing the freehold, one could either value it with vacant possession following exercise of the options and surrender of the leases which were the subject of those options, or one could value it subject to the leases. The Financial Proposal is far from clear as to the philosophy adopted by the parties in these respects and, in particular, it is not clear where the figure of £450,000 of the freehold came from. It would have been a difficult exercise to carry out a development appraisal and to assess the value of one individual piece of the jigsaw which needed to be put together to create the development site. In my judgment, what the parties did agree was that WCL could pay £450,000 for Bradcliffe’s freehold and if it did so that figure would be brought into account. They also agreed that WCL could reimburse Bradcliffe for Bradcliffe’s historic expenses in relation to the options, and in relation to legal and planning costs, without an inquiry as to whether those costs and expenses added value to Bradcliffe’s interests nor an inquiry as to whether such value was already taken account of in the £450,000. However, the purpose of the JVA would be undermined if WCL paid to Bradcliffe sums which went beyond reimbursement of Bradcliffe’s expenses of this kind. Further, consistently with the general requirement of the JVA that WCL should produce evidence of its expenditure, WCL would, if required, have to show that the payments it made to Bradcliffe were genuinely by way of reimbursement of Bradcliffe’s expenses of the kind referred to in the Financial Proposal. Further, if WCL did not pay Bradcliffe for its rights and is not contractually liable to pay for its rights, then WCL can only bring into account the sums it has paid and/or is contractually liable to pay Bradcliffe. The JVA is between Ross River and WCL and Bradcliffe is not a party to it.
104.	There is one other general matter with which I will deal before addressing the individual items of disputed expenditure. The burden of proving the facts in relation to deductible expenditure must fall on WCL. It is WCL which asserts that a cost should be deducted. That fact alone shows that it must prove the underlying facts which justify the deduction. This conclusion is also consistent with the contractual provisions: see clause 7.7. WCL’s evidence in relation to disputed items of expenditure principally came from Mr Barnett. I have already indicated that I do not regard Mr Barnett as a reliable witness in relation to many of the matters in dispute in this case. Further, although the burden of proof in these respects is on WCL, there were significant matters in dispute where WCL did not seem to try to assemble and adduce the necessary evidence. The forensic accountant instructed by Ross River, Mr Davidson, asked a large number of questions as to the underlying data. WCL’s answers to those questions were often wrong, or incomplete or otherwise unsatisfactory. As I have explained, the court has to make its findings on the evidence adduced and in this respect its position may be different from what might have been permissible on the part of an independent expert appointed pursuant to clause 15 of the JVA.
Net Profits: the cost of the freehold
105.	The first disputed item of expenditure concerns the sum paid by WCL to Bradcliffe to acquire Bradcliffe’s freehold interest in a part of the site and/or to acquire the benefit of options originally granted to Bradcliffe, allowing it to acquire outstanding leasehold interests in the area of land which it owned freehold. WCL says that the appropriate figure for expenditure is £450,000. Ross River says that the appropriate figure is £300,000. This dispute overlaps with the next matter in dispute which concerns Bradcliffe’s historic costs in, amongst other things, acquiring those and other options. Although the two disputes overlap, and in particular, Ross River says that to allow WCL to deduct expenditure of £450,000 and to deduct historic costs for options is to double count, I will in the first instance try to consider separately, so far as is possible, the dispute as between the £450,000 and the £300,000.
106.	The Financial Proposal refers to the relevant freehold interest and places a figure beside it of £450,000. The Financial Proposal separately records the projected prices for the leases outstanding against that freehold property. Those prices were to be paid to the lessees, on exercise of the options to acquire their leases. In addition, the Financial Proposal included a figure of £217,000, part of which was said to be for the historic costs of Bradcliffe acquiring those options together with a further £40,000 as the projected costs in relation to options, such costs to be incurred on 31st March 2005.
107.	There was no evidence as to where the figure of £450,000 came from before it appeared in the Financial Proposal. If WCL had acquired Bradcliffe’s freehold for £450,000 then, in my judgment, WCL would have been entitled to claim that cost as deductible expenditure. There was no reliable evidence before the court which would enable the court to say that that figure represented an over payment for the freehold and the terms of the JVA appeared to contemplate that WCL could acquire the freehold for that figure and deduct that sum for the purpose of calculating Net Profits.
108.	The transaction which took place between Bradcliffe and WCL took the following form. Bradcliffe assigned to WCL the benefit of its options to acquire the leases in its freehold property. The assignment stated that the price payable was £150,000. WCL then exercised those options and acquired the leases for the prices in the option agreements which were payable to the lessees. Then Bradcliffe transferred the freehold to WCL; the transfer stated that the price for the transfer was £300,000. The terms of the leases merged in the freehold now vested in WCL. WCL paid the aggregate sum of £450,000 to Bradcliffe. 
109.	It is clear from the evidence that the transaction between Bradcliffe and WCL took the form which it did because a smaller sum of SDLT was payable as compared with a sequence where Bradcliffe exercised the options to acquire the leases and then merged the leases in the freehold and then transferred the freehold with vacant possession to WCL. It seems to have been the intention to submit the completed documents to the taxing authorities on the basis that the value of the freehold subject to the leases was £300,000 and the value of the benefit of the options was £150,000. I do not regard those figures as reliable as statements of the true value of the various interests and an assessment of such values would have been a difficult exercise.
110.	In my judgment, subject to arguments about double counting which I will consider below, the sum which WCL paid to Bradcliffe for Bradcliffe’s interests in the site, whether considered as a single interest being a freehold with vacant possession (following merger of the leases) or considered as a package comprising a reversion on various leases together with options to acquire and then merge the leases in the freehold, was in substance £450,000 and not £300,000. I find that WCL is entitled to bring the higher figure into account for the purpose of calculating the Net Profits.
Net Profits: Bradcliffe historic costs
111.	The next item of expenditure in dispute concerns what have been described collectively as the Bradcliffe historic costs. As already explained the Financial Proposal includes a figure of £217,000 for “costs, option fees, planning & legal etc” and a further figure of £40,000 for “option fees due 31-3-05”. These total £257,000. Initially, WCL contended that it incurred a further £23,000 bringing the total expenditure to £280,000. In closing submissions, WCL accepted, as a result of certain evidence given by Mr Barnett, that it could not substantiate the alleged additional £23,000. Thus, WCL claimed £257,000 in relation to this item.
112.	WCL’s case in relation to the claim to £257,000 was that this aggregate figure was stated in the Financial Proposal and therefore WCL was entitled as a matter of contract to insist that this figure was brought into account in calculating Net Profits. It contended that it was not necessary for it to show that Bradcliffe had incurred those costs or that WCL had reimbursed Bradcliffe that expenditure. I do not accept those contentions. For the reasons already given when I construed the JVA and the Financial Proposal it is necessary for WCL to establish that it did reimburse Bradcliffe for these historic costs. That proposition has two elements: first, that WCL paid Bradcliffe and secondly, that the payment was by way of reimbursement of Bradcliffe’s historic costs in relation to the development and not for something else.
113.	Mr Davidson, the forensic accountant acting on behalf of Ross River, spent a considerable amount of time investigating such evidence as there was as to sums paid by Bradcliffe which might be said to come within the relevant heading in the Financial Proposal. I accept his evidence that the task was a difficult one given that Bradcliffe and WCL were not able to produce reliable evidence of this expenditure. Eventually, Mr Davidson wrote in the Joint Statement of the experts that he was prepared to accept that Bradcliffe had incurred costs of £208,621.97 in relation to this heading in the Financial Proposal; of that figure a little over £150,000 comprised expenditure on the acquisition of options over the years.
114.	Although the burden of proving that Bradcliffe had incurred expenditure in this regard lay on WCL and although WCL made no real effort to discharge that burden directly, it is fortunate for it that Mr Davidson has thoroughly investigated the matter and has been prepared to conclude as he has done. I therefore find on the basis of Mr Davidson’s investigations that Bradcliffe did incur £208,621.97 in relation to this item.
115.	There potentially remains the separate question as to whether WCL reimbursed Bradcliffe for this expenditure. If that matter had been seriously disputed, it might have been difficult to reach firm findings on the evidence before me.  A source of the difficulty was that there were many payments passing between Bradcliffe and WCL but no particularly clear evidence as to what they represented. In closing submissions, Ross River accepted that if it were shown that Bradcliffe had incurred this expenditure then this expenditure incurred by Bradcliffe should be taken into account in the calculation of Net Profits as expenditure by WCL. Ross River made this suggestion “subject to the Court”. The court has no reason not to accept Ross River’s concession in this respect.
116.	The next point which arises in relation to this head of expenditure is whether WCL can deduct expenditure of £150,000 (the suggested value of the options) as part of the payment of £450,000 made to Bradcliffe and also a figure a little over £150,000 as part of the expenditure of £208,621.97. Ross River says that to include a sum of approximately £150,000 twice is double counting and should not be permitted.
117.	In my judgment, it is open to WCL to claim to deduct both the expenditure of £450,000 and the expenditure of £208,621.97 as referred to above. The two sums of money are for different things and there is no double counting. In substance, the payment of £450,000 is in return for Bradcliffe transferring its rights to WCL, whether those rights are regarded as a freehold with vacant possession (the options having been exercised and the leases having merged) or as the package of a freehold reversion subject to leases together with the benefit of the options. The expenditure of £208,621.97 is for historic expenditure incurred by Bradcliffe and reimbursed by WCL. That expenditure includes historic costs in relation to acquiring options but that cost is not to be equated with the value of the options when transferred to WCL in March 2006. Ross River might have insisted that WCL was not entitled to deduct Bradcliffe’s historic costs and that, instead, WCL was only entitled to deduct the sum it would pay Bradcliffe to represent the open market value of its freehold reversion together with the benefit of the options. However, on my construction of the JVA and the Financial Proposal, WCL is entitled to deduct Bradcliffe’s historic expenditure even if it did not add value to the site. Indeed, in my view, it is likely that some at least of that expenditure did not add to the current value of the site either at the time of the JVA or at the time of completion when WCL acquired Bradcliffe’s interests. For example, some of the payments to acquire options were in relation to options that had expired some time earlier. The expired options did not have a current value. I think that the right way to understand what the parties agreed in these respects is as follows: (1) WCL and Mr Barnett agreed to procure Bradcliffe to transfer its rights to WCL in circumstances where WCL could deduct £450,000 (if it actually paid it to Bradcliffe) from the calculation of Net Profits; and (2) WCL would reimburse Bradcliffe for its historic expenditure and when Net Profits are calculated, that historic expenditure could also be deducted.
118.	In relation to historic costs, WCL is entitled to deduct the figure put forward by Ross River of £208,621.97, but no more.
Net Profits: the snooker club
119.	The next disputed item in relation to expenditure concerns the amount which should be deducted in relation to WCL exercising an option to acquire the residue of the term of a 999 lease from Mr and Mrs Saunders, in relation to a snooker club on the first floor above the shops in Rose Walk. Ross River says that the right figure is £550,000 and WCL contends that the right figure is in excess of £819,000.
120.	I will first describe the position as disclosed by the documents. On 5th July 1991, Mr and Mrs Saunders were granted a lease of the snooker club for 999 years from 5th July 1991. The snooker club premises were a part of the development site. On 30th April 1999, Mr and Mrs Saunders granted Bradcliffe an option to acquire the term of the lease for £365,000. That option was not exercised and at the end of a specified option period it lapsed. In 2002, Mr and Mrs Saunders granted Bradcliffe an option to acquire the term of the lease for £725,000. That option was not exercised and at the end of a specified option period it lapsed. For a period, there was no extant option agreement between Mr and Mrs Saunders and Bradcliffe. On 30th November 2004, following a meeting between them, Mr Barnett wrote to Mr Saunders proposing a further option at a price of £725,000 together with a sum of £25,000 in cash, the cash to be paid in Dubai where Mr Barnett was then living. On 6th November 2004, Mr and Mrs Saunders granted Bradcliffe an option to acquire the term of the lease for £725,000. The period during which this option could be exercised ran to 30th September 2005. It may be that that period was later extended. The Financial Proposal annexed to the JVA (of 23rd December 2004) referred to the option in respect of the snooker club and stated that the projected cost was £725,000, pursuant to an option exercisable up to 30th September 2005. In February 2006, Mr and Mrs Saunders granted Bradcliffe an option to acquire the term of the lease for £550,000. The period during which this option could be exercised ran to 28th February 2006. It seems that this option was assigned to WCL and exercised by it. Mr and Mrs Saunders assigned the term of the lease to WCL by a Land Registry form, TR1, which recorded the consideration paid as £550,000. WCL did indeed pay this sum to Mr and Mrs Saunders. SDLT was paid in relation to that sum. The Land Transaction Return to HMRC was completed by Williams & Co on behalf of WCL. On 28th February 2006, Mr Barnett and Mr Harney entered into a promissory note in favour of Mr and Mrs Saunders promising to pay within 6 months thereafter the sum of £200,000 together with interest of £6,000 alternatively within 9 months thereafter £200,000 together with interest of £25,000. There was a later promissory note by Mr Barnett and Mr Harney, dated 28th February 2006, but only signed by Mr Harney in March 2007, in favour of Mr and Mrs Saunders promising to pay £225,000 plus interest at 2% above Bank of England base rate. Neither Mr Barnett nor Mr Harney have paid any sum to Mr and Mrs Saunders pursuant to these promissory notes.
121.	I heard evidence from Mr Saunders in relation to the options and the promissory notes in respect of the snooker club lease. I find that Mr Barnett acting on behalf of WCL agreed to take an option to purchase the lease for £725,000 plus £25,000 in cash. Later in February 2006, Mr Barnett told Mr Saunders that he could not raise the full amount (whether £725,000 or £750,000) at that time because of all the other sums he had to find to complete the series of transactions in February and March 2006. Mr Saunders was persuaded to transfer the lease for the sum of £550,000 paid by WCL and to accept promissory notes from Mr Barnett and Mr Harney. Part of the reason for agreeing to this was the realisation that if Mr Barnett could not afford the full price previously agreed and could not complete his assembly of the site, then the option would not be exercised and Mr Saunders could potentially be worse off.
122.	The legal consequence of the above arrangements was that after Mr and Mrs Saunders assigned their lease to WCL for £550,000 they were not entitled to be paid any further sum by WCL. They are entitled to enforce the second promissory note against Mr Barnett and Mr Harney. If Mr Barnett and Mr Harney were to pay a sum to Mr and Mrs Saunders pursuant to that promissory note (which has not so far happened) then the question would arise as to whether WCL would be liable to indemnify Mr Barnett and Mr Harney in relation to that payment. If so, it might be said that the sum paid by WCL pursuant to that indemnity was expenditure to be deducted on the calculation of Net Profits.
123.	Ross River drew attention to some letters written by the solicitors for WCL and Mr Barnett in the course of this litigation. It was suggested that in those letters Mr Barnett had accepted that he was personally liable for the sums remaining due to Mr and Mrs Saunders and that WCL was not liable. A letter from those solicitors of 29th October 2010 referred to the sums remaining due to Mr and Mrs Saunders not being an expense of the development. The letter then referred to Mr Barnett personally taking responsibility for paying Mr and Mrs Saunders. Then the letter said that subject to proof of payment to Mr and Mrs Saunders, the solicitors’ clients would be given credit “in the Development Account” which would seem to be a reference to the calculation of Net Profits. In a later letter of 15th December 2010, the same solicitors referred to Mr Barnett arranging that the debt owed to Mr and Mrs Saunders would be “assigned” by WCL to Mr Barnett. When Mr Barnett gave evidence, he referred to the sums due to Mr and Mrs Saunders and said that they would be paid personally by him. Although the meaning of the letters and of Mr Barnett’s evidence is not wholly clear, I do not think that I can interpret it as Mr Barnett accepting that if he paid the sum remaining due to Mr and Mrs Saunders, he would not be entitled to have that sum deducted as expenditure when calculating Net Profits; indeed, the solicitors’ letter of 29th October 2010 says the opposite.
124.	I also have to consider the way in which counsel for WCL and Mr Barnett put the matter in the course of closing submissions. Counsel submitted that a sum in excess of £550,000 could only be claimed as a deduction in the calculation of Net Profits if WCL had a liability to pay a sum in excess of £550,000. It was then submitted that WCL could be said to have such a liability in one of two ways. The first was where WCL had a direct liability to pay such a sum to Mr and Mrs Saunders. The second was said to be where WCL was liable on a restitutionary basis to pay Mr Barnett if Mr Barnett in fact “discharged a liability of [WCL] to Mr and Mrs Saunders. That liability has to have been on [WCL]”. If I consider the approach put forward on behalf of WCL and Mr Barnett, then my conclusions are as follows. After WCL and Mr and Mrs Saunders entered into the option agreement in around February 2006, WCL did not have to pay any sum in excess of £550,000 when it exercised the option to acquire their lease. So, on the first way that the case is put, WCL did not have a liability to pay in excess of £550,000. As to the second way that the case is put, if and when Mr Barnett were to pay a further sum to Mr and Mrs Saunders, he is not discharging a liability of WCL; he is discharging a liability of Mr Barnett and Mr Harney alone. Accordingly, having regard to the way in which the case has been put, I find that WCL is not liable to pay any sum in excess of the £550,000 it has already paid. Accordingly, that sum but no more should be deducted in the calculation of Net Profits. I confess that I am not entirely convinced that the two arguments put forward by counsel for WCL and Mr Barnett exhaust all the possibilities but those were the only two ways in which I was asked to find that a sum in excess of £550,000 should be deducted. I am unable to accept either of those arguments.
Net Profits: legal fees 
125.	The next issue is as to the legal fees incurred by WCL and for which it claims credit in the calculation of Net Profits. The sum put forward by WCL was £286,062.75, plus VAT. Of that sum, WCL paid £200,000 plus VAT on or after completion of the sale to Legal & General in March 2006. As to the remaining £86,062.75 plus VAT, it was agreed between WCL and Williams & Co that this sum would remain outstanding until it was required to be paid on completion of the last sale of a residential unit within the development. As I have indicated, the last unit was sold during the course of the trial. This agreement to defer payment of that element of the fees was recorded in the completion statement prepared by Williams & Co in March 2006.
126.	Ross River’s position is that the number of hours charged by Williams & Co to WCL (1,414 hours) was excessive, either because it was wrongly computed or for some other reason. Ross River’s forensic accountant has taken a smaller number of hours (725 hours) from certain computer records maintained by Williams & Co. Based on that smaller number of hours, Ross River contends that the proper sum for legal fees to be brought into account in the calculation of Net Profits is £127,602. 
127.	Before considering the detailed evidence on this matter, it is useful to consider the approach which I should adopt. Part II of the Schedule to the JVA allows WCL to deduct legal fees which have been “reasonably incurred”. The JVA is an agreement between Ross River and WCL. The reference to fees being reasonably incurred appears to me to focus on the position as between Ross River and WCL and to raise the question whether, as between those parties, the legal fees have been reasonably incurred. That question therefore relates to the conduct of WCL in incurring the relevant fees. If WCL had behaved unreasonably in incurring legal fees, then as between Ross River and WCL, only a reasonable fee would be brought into account and WCL would be left to bear any excess over a reasonable fee.
128.	At the hearing it seemed to me that the question as to whether WCL’s conduct in incurring a fee was reasonable was different from the question whether the charge made by the solicitor to WCL was a reasonable charge. There could be cases where it was reasonable as between the solicitor and WCL for WCL to bear a certain level of charge but it was not reasonable as between Ross River and WCL for WCL to be allowed to bring the full amount of that charge into account for the purpose of calculating Net Profits. I had in mind a case where WCL knowingly instructed a specialist solicitor when a general practitioner would suffice. It might be reasonable for the specialist to charge WCL the specialist’s normal fee, which had been agreed in advance, but not reasonable to allow WCL to have a credit for the full amount of that fee as against Ross River. Conversely, there could be cases where it was unreasonable as between the solicitor and WCL for WCL to bear a certain level of charge but it was reasonable as between Ross River and WCL for WCL to be allowed to bring the full amount of that charge into account. I had in mind the case where WCL had to make a difficult decision whether to challenge the bill which had been submitted and, on reasonable grounds concerning risk and further costs, WCL decided to pay the bill rather than challenge it. 
129.	In the course of closing submissions, I raised with counsel the question as to the approach I should adopt. I would have expected WCL to submit that the court should assess the conduct of WCL and ask itself if WCL acted reasonably in incurring legal fees at the level charged by Williams & Co. Although I did not find the answers to my questions wholly clear, having read and re-read the transcript of the relevant exchanges, I understand that counsel for WCL asked me to assess a reasonable fee for the work done by Williams & Co.
130.	I also pointed out in the course of closing submissions that if Williams & Co’s bill had been the subject of a detailed assessment under section 70 of the Solicitors Act 1974, then there were established rules which would have been applied. I had in mind the Solicitors’ (Non-Contentious Business) Remuneration Order 1994. That Order and the cases relating to previous Remuneration Orders are considered in Halsbury’s Laws, 5th ed., vol 66, paras 936 – 937. Both counsel submitted to me that it was not appropriate for me to attempt to carry out a detailed assessment, applying the Remuneration Order. I confess that I did not find the answers given to me by either counsel to be particularly clear nor convincing. Nonetheless, I will act in accordance with what I understand both sides asked me to do, which is to consider in a general way, on the evidence in this case, whether the legal fees charged to WCL, and not challenged by WCL, were reasonable fees for the solicitors to charge. Apparently, I am asked to decide that issue without expressly considering the Remuneration Order, nor going into too much detail.
131.	The solicitor at Williams & Co who did most if not all of the work, which was the subject of the relevant bill, was Mr Barton, who gave evidence at the trial. He dealt with the question of his fees in his witness statements and he was also cross-examined on that subject.
132.	In Mr Barton’s witness statement, he described the approach he adopted to what he called his “core clients”, who included Mr Barnett and his companies. With these clients, Mr Barton did not write letters of engagement, nor send letters about fees nor provide estimates of costs. His clients trusted him to be fair with them. His standard arrangement with his core clients was to charge his time at an hourly rate, at the relevant time £210 per hour plus VAT, and in appropriate cases of complexity to add a mark up of 0.5% of the transaction value. Mr Barton’s practice was only to bill clients at the end of the transaction. In this case, although he had been dealing with the possible development of this site for Mr Barnett and his companies since 1998, he only delivered a bill on completion in March 2006. As to time recording, Mr Barton said that he operated a limited and not comprehensive time recording system. He introduced a time recording system into his firm but he did not use it all of the time because he was too busy or pre-occupied. When he came to calculating the hours he had spent on a matter, he relied on file notes and paper copies of correspondence and documentation. He also made notes of time spent on the correspondence file. He explained that he sometimes missed things out and so did not charge for them. Mr Barton then referred to some of the legal work which was involved in the transaction. He referred to the complexity of the matter and the involvement of demanding solicitors acting for other parties. He did all the legal work on behalf of WCL even when there were several solicitors acting for other parties. Mr Barton stated that it would take him a full week of his time doing nothing else to assemble a detailed time record in respect of the matters which were the subject of query or complaint by Ross River’s forensic accountant. Mr Barton believed that the resulting figure would be no less and would probably be significantly more than the figure he had billed. He then explained how he had worked out his bill in March 2006. The exercise of calculating his fees took him three full days. He went through all of the files and records which he had. There were 113 files or ringbinders. He went through each file and noted any marking on a document as to the time which had been spent. In relation to correspondence or an attendance note of a telephone conversation, he estimated (in March 2006) the time spent. He then wrote his estimate on to the document in question. He made notes as he went along but they have not survived.  The total time element of his bill charged at the appropriate rate for each year was £248,590. In addition to the time element, in view of the importance to the client, the unsociable hours worked for a very extended period, the complexity of the matter and the responsibility he bore, he added 0.5% of the consideration passing under the transaction, which brought the total bill to £286,103 plus VAT. The sum added was therefore £37,513. He stated that he would have been justified in charging 1.0% of the consideration. Mr Barnett had used an estimated figure of £175,000 in certain appraisals but that figure was not provided by Mr Barton. Towards the time for completion, Mr Barton did estimate the legal fees at £200,000 and he was surprised when the time element came out at around £250,000. In a later witness statement, Mr Barton explained that his bill included a charge of £7,950 under the heading “Shell Site”. This related to the preparation of the JVA. Although properly chargeable to WCL, Mr Barton stated that it had been agreed with the solicitors acting for Ross River in relation to the JVA that each side should bear its own costs of this work and so that figure should be removed from the legal fees which were brought into account in the calculation of Net Profits.
133.	Mr Barton was cross-examined about the computer records and the times recorded for this transaction. It was put to him that he had prepared time records as he went along and the hours recorded were much less than the hours for which he later billed. He said that his time records were haphazard and incomplete. He described again the way he had gone about calculating the time spent when he drew up his bill. His primary source of information was the paper files rather than the computer records. He was cross-examined about the amount of time he said he had spent on various parts of the transaction and it was put to him that the times charged could not have been spent. He stated that the times were accurate as the work was extremely time consuming. It was suggested to him that he had included charges for other work done for Mr Barnett and Mr Harney. He did not accept that.
134.	Counsel for Ross River submitted that the evidence as to the reasonableness of the legal fees was wholly unsatisfactory. The computer records showed times spent which justified a fee of £127,602. (I understand that this figure did not include the sum of £37,513 added by Mr Barton to his fee based on time alone.) The evidence of Mr Barton that he had spent more time than was shown in the computer records was unreliable. It was submitted that Mr Barton was guilty of mortgage fraud in relation to one part of his dealings with Mr Barnett and was generally an unreliable witness. It was said that Mr Barton was unable to explain a reference to Waveley Developments on the completion statement. It was said that the exercise whereby Mr Barton spent 3 days going through his files involved him spending, on average, 13 minutes for each of the 113 files which covered the period from 1998 to 2006. Mr Barton could not produce his working papers showing what he did in those 3 days. It was submitted that Ross River and the court were in a difficult position in seeking to deal with this matter. Accordingly, the court should assess the costs at £127,602 plus VAT based on the computer records. Alternatively the court should adopt the figure of £175,000 plus VAT as that was the estimated cost provided to Ross River at an earlier time. That figure was consistent with the computer records showing 63% of the time spent and allowed Mr Barton a further 37% of the total time charge in relation to unrecorded time.
135.	I can now express my conclusions on the reasonableness of Mr Barton’s fees. The principal point which needs to be decided relates to the number of hours which Mr Barton actually spent on the transaction. The relevant period put forward by Mr Barton runs from 1998 to 2006. Ross River does not say that it is only liable for the period from the JVA onwards. There are two sources of evidence as to the time spent by Mr Barton. The first consists of the computer records and the second is Mr Barton’s own calculation of the time which he spent. For this purpose, I need to form an assessment of the reliability of his evidence. Mr Barton has behaved wrongly and dishonestly in connection with the purchase of Flat 12. However, my assessment of him is that when he came to give his evidence, he genuinely tried to give accurate evidence of the facts, as he recalled them. His acknowledged fault in relation to Flat 12 made it all the more important for him to be entirely straight when he came to give his evidence, rather than for him to compound his fault by giving unreliable evidence to the court. Mr Barton’s relationship with Mr Barnett is a very close one, which goes beyond a professional relationship. Mr Barnett is not a reliable witness. Mr Barnett is hostile to Ross River and has allowed that hostility to affect the evidence he has given in this case. Mr Barton must be aware of the approach Mr Barnett has adopted to this claim. However, the evidence which Mr Barton gave as to the time he spent is based on the work he did in March 2006 for the purpose of preparing a bill to his client. That evidence is unlikely to be tainted by Mr Barnett’s hostility to Ross River. I do not think that the reference to Waveley Developments in the completion statement is of any significance in this respect.
136.	In my judgment, it is appropriate to accept Mr Barton’s evidence that he did spend more time on this transaction than is recorded in the computer records. However, I consider that the exercise which he did in March 2006 to compute that time is unlikely to be reliable. That exercise was overly dependent on Mr Barton expressing a view as to how long he spent on something, sometimes years earlier, when he often did not have a note of the time actually involved. It is possible that the result of that exercise was to underestimate the time spent and the resulting charges. But it is also possible that his method has resulted in an over estimate. In my judgment, it is not safe simply to adopt Mr Barton’s own estimate when it was produced in such a flawed way. I do accept much of what Mr Barton told me about the complexity of the transaction and the demands made upon him by the lawyers acting for the other parties. I believe I am able to judge that matter from all the evidence which I heard about what was involved in this transaction and about the frequent crises caused by cash flow and other difficulties. I consider, on the balance of probabilities, that Mr Barton’s estimate of the time spent is a little too high and I will adopt a lower figure for time charges. 
137.	There does not appear to be any point taken by Ross River as to the rates per hour which have been charged. I also accept that it is reasonable for Mr Barton to add a mark up to reflect the many matters to which he referred in his evidence. In my judgment, a reasonable fee for the work he did should be assessed as follows: £225,000 for time charges together with £37,500 by way of a mark up, making a total of £262,500. From that is to be taken the fee of £7,950 for work on the JVA; Mr Barton told me that the parties had agreed that each side was to pay its own legal costs in relation to that work. This produces a net figure of £254,550 for legal costs reasonably incurred to be used in the calculation of Net Profits. 
Net Profits: management fees
138.	WCL says that it incurred, and reasonably incurred, management fees of £240,000 in connection with the development. Ross River accepts that WCL is entitled to deduct management fees of £120,000, but not any higher figure, when calculating Net Profits.
139.	The management fees, whether in the sum of £240,000 or £120,000 were paid by WCL to Mr Barnett and Mr Harney. Accordingly, the fees were paid to the two shareholders of WCL. Mr Barnett says that somebody had to manage the development. If a third party had been retained to manage the development, then that manager would have had to be paid. Mr Barnett then says that WCL was entitled to engage himself and Mr Harney as managers and pay them an appropriate fee for such management.
140.	In my judgment, I ought to be cautious about a charge which is given the name “management fees”. It appears from other evidence in this case that Mr Barnett and Mr Harney were in the habit of using this term to refer to payments being made to them by companies they controlled even where there was no liability on the part of the company to make those payments. An example of this appeared in the context of the negotiations for the side agreement to which I will refer later in this judgment. In that context, the description of “management fees” was intended to be used in an attempt to explain why a company was paying a substantial sum of money to Mr Barnett and Mr Harney. In truth, the term “management fees” was being used to misdescribe the position.
141.	Quite apart from the dispute in the present case about part of the £240,000 claimed as management fees, Ross River’s forensic accountant has found other substantial charges described as management charges or consultancy fees whereby monies left WCL in the direction of Mr Barnett or Mr Harney or companies controlled by them.
142.	It is also far from clear to me that WCL was entitled to incur an expense in paying its shareholders, Mr Barnett and Mr Harney, for things which WCL was obliged to do or was expected to do under the JVA.  After all, under the original terms of the JVA, WCL was to retain two thirds of the Net Profits. There is at least a serious doubt as to whether WCL was entitled to make payments to its shareholders and then to claim that those payments reduced the Net Profits which it had to share with Ross River. These doubts about what was going on are only deepened when one knows that there were no invoices from Mr Barnett or Mr Harney for management services but only unexplained payments out to them.
143.	The subject of management charges came to be discussed by the parties at a meeting on 6th February 2006. There were a number of difficulties between the parties in the period leading up to that meeting. The meeting was agreed to have been a difficult or tense meeting. One of the matters which was considered at the meeting was the entry in an appraisal prepared by WCL of an item of expenditure of £120,000 for “Management fees @ 10k a month max 1 year”.
144.	The meeting on 6th February 2006 was attended by Mr York, Mr Carr and Mr Barnett and Mr Harney. I heard evidence from all of these except Mr Harney. Mr York and Mr Carr questioned the suggested expenditure on management fees. Mr Barnett and Mr Harney explained the figure as being a fixed cost to compensate them for their work in getting the development completed and sold. Although there is a difference between £120,000 being a fixed cost and it being a maximum cost, and although the appraisal refers to “max 1 year”, I consider that the parties proceeded on the basis that it was likely that the development would be unsold for at least 1 year so that 1 year was both the maximum period for a management fee but also the expected length of the period rather than a shorter period. I accept the evidence of Mr York and Mr Carr that it was expressly agreed at or shortly after the meeting of 6th February 2006 that the management fee to be paid by WCL to Mr Barnett and Mr Harney was not to exceed £120,000.
145.	Mr Barnett gave evidence of his belief that Mr Harney had agreed with Mr York after the end of the first year of the development, at a time when the building works were suffering delays, that a further £40,000 for management fees could be paid by WCL to Mr Barnett and Mr Harney. Mr Harney did not give any evidence in this case. This alleged agreement was not put to Mr York or Mr Carr. I am unable to accept Mr Barnett’s evidence on many matters and I am not prepared to accept evidence of his belief as to what somebody else had agreed as hearsay evidence that such an agreement was made.
146.	In addition to the initial £120,000 in relation to management fees, WCL made further payments to Mr Barnett and Mr Harney, and particularly to Mr Barnett rather than Mr Harney, of £40,000, £28,000 and £52,000. In my judgment, the express agreement between Ross River and WCL in February 2006 prevents WCL claiming these payments as expenditure which is to be deducted in computing Net Profits.
147.	In view of my finding in the last paragraph, it is not necessary to consider whether the further payments of £40,000, £28,000 and £52,000 were in return for Mr Barnett or Mr Harney providing management services and, if so, whether the sums involved were reasonably incurred. If it had been necessary to decide that question, I would not have been persuaded that it was reasonable for WCL to incur liability for anything like these figures. The payments of £28,000 and £52,000 were made to Mr Barnett rather than to Mr Harney. At the relevant time, Mr Barnett lived in Spain. In so far as Mr Barnett tried to explain why the payments were made, he referred to what might have been done by Mr Harney but Mr Harney did not receive the payments. It should also be remembered that WCL engaged selling and letting agents for the flats and the shops and these agents were paid fees. My overall sense of what was happening was that Mr Barnett and Mr Harney were simply drawing money out of WCL and when this dispute arose as to what sums were reasonably incurred by WCL, Mr Barnett simply chose to describe some of the drawings as management fees when there was no real basis for that description.
Net Profits: administration costs
148.	WCL claims to deduct certain charges from the calculation of Net Profits. These charges have been grouped under the heading “administration costs” and total £85,910. On examination, there appear to be four components in these costs. The first relates to £38,700 of costs said to have been incurred in relation to what is called Cambridge Office Secretarial. The accounting records of WCL show regular monthly payments being made to Waveley Project Management, which was a company controlled by Mr Harney. The payments cover the period from early 2005 to late 2007 when they stop. Mr Barnett explained in his evidence that the office in Cambridge was used in connection with three projects, of which the Ampthill project was one, and one-third of the office costs were charged to WCL. The sum involved is a large one. It is paid, effectively, to one of the shareholders in WCL. It appears to have been computed not so much as a reasonable fee for the services provided, if any, but as a way of Mr Harney recovering costs he had undertaken for other reasons.
149.	The second component in the sum of £9,080.41, was described as freelance office services which Mr Barnett explained were book-keeping services from March 2006 up to the middle of 2009. Accordingly, some of these book-keeping services overlapped with the period during which sums were paid to Mr Harney’s company for secretarial services in Cambridge.
150.	The third component, in the sum of £4,148.75, was explained by Mr Barnett as costs from the middle of 2009 onwards. These were said to be book-keepers’ fees and office storage costs.
151.	The fourth component, in the sum of £33,981, was described as Collett Hullance fees for accountancy services. Mr Barnett said that accounts were prepared from time to time to enable WCL to show the financial position to Ross River. On the other hand, I have clear evidence of Ross River complaining that it was being kept in the dark by WCL. Collett Hulance did prepare a calculation intended to be used for the purpose of determining the Net Profits under the JVA but the resulting figure appears to have been very much lower than any figure contended for at the trial. There is therefore a serious issue as to whether any sum paid to Collett Hulance for that exercise was reasonably incurred. Further, I do not think that accountancy fees incurred by WCL to comply with its statutory obligation to prepare accounts can be deducted from the calculation of Net Profits.
152.	It is very difficult to know how to react to the very incomplete and apparently unreliable material which I have in relation to these administration costs. The burden of showing that costs have been incurred on permissible matters and that the level of costs is reasonable is on WCL. WCL has a contractual obligation to Ross River to provide Ross River with invoices. WCL has done very little to discharge these burdens. Invoices have not been provided for all of the sums claimed. Mr Barnett has described matters in general terms. I do not find Mr Barnett to be a reliable witness and I do suspect much of what he has told me on these matters. Further, there is a difficult point as to when the matters for which charges are being claimed should be considered to be part of the management of the development for which Ross River agreed to allow to WCL a maximum or a fixed fee of £120,000.
153.	One course would be to hold that WCL has failed to discharge the burden of proof that these costs were incurred on permissible matters and that they were reasonable and that they are not repeating costs for which £120,000 of management charges had already been allowed to WCL. I consider that may be too harsh a verdict on WCL. Conversely, I am simply not satisfied, on the balance of probabilities, that WCL is entitled to all of its claim. In particular, I consider that most of the sums put forward in relation to the largest two components, the Cambridge secretarial expenses and the Collett Hulance fees are not recoverable. Ross River’s forensic accountant was prepared to acknowledge that a sum of £20,000 could be regarded as a reasonable charge for incremental administration costs not already included in management charges. In these circumstances, and in the absence of reliable figures from WCL itself, I am prepared to give WCL the benefit of the doubt and adopt that figure of £20,000.
Net Profits: Westbury
154.	The next group of costs which need to be considered are those claimed by WCL in relation to a sale or sales of various interests in the development site to Mr Barnett and/or Westbury. I have described these proposed transactions earlier in this judgment. The fees in question were two sets of valuer’s fees of £2,013 and £1,750. A third fee in the sum of £575 appears to relate to advice from counsel.
155.	In my judgment, these fees cannot be deducted in favour of WCL in the calculation of Net Profits. They were not incurred for the purpose of the development or the joint venture. They were for the separate purposes of Mr Barnett and of Westbury, a company controlled by Mr Barnett.
Net Profits: bank charges and interest
156.	WCL incurred substantial bank charges and a liability to pay interest. The parties agreed that if I determined all the other issues which were raised as to the calculation of Net Profits, the forensic accountants would then be able to establish the cash flow consequences which there would have been for WCL in respect of all revenues and expenditure which would then be treated as relevant. The forensic accountants would then be able to calculate the level of bank charges and interest which WCL would reasonably have had to bear having regard to such cash flow. Those reasonable bank charges and interest could then be treated as relevant expenditure for the purposes of calculating Net Profits. I gladly leave the task to constructing the appropriate cash flow and calculating bank charges and interest to the accountants. I understand that when I decide the issues that have been identified for me and when the accountants have calculated the bank charges and interest, the resulting figure for Net Profits will emerge.
Net Profits: miscellaneous matters
157.	There is a somewhat obscure point about the correct treatment of £5775 which was described as “Budgens reimbursement of store outgoings”. That figure does appear as a deduction in the completion statement in March 2006. Collett Hulance did not include this sum as a separate expense when compiling its accounts. Ross River’s forensic accountant has followed Collett Hulance’s approach. WCL’s forensic accountant has listed this item as an item of expenditure. Ross River submitted to me that it was not clear that it should be deducted as expenditure. WCL made no submission on the point. In these circumstances, I will not include this as a separate item of expenditure.
158.	The next disputed item is a sum of £4258 on the basis that this sum is irrecoverable VAT. WCL has not established the basis for this item and I disallow it as an item of deductible expenditure.
159.	Finally, I was asked to determine the correct treatment of penalty payments which WCL was obliged to make as a result of late filing of returns. I consider that these payments may not be deducted in the calculation of Net Profits because they were not reasonably incurred. They should have been avoided.
The issues as to the side agreement
160.	The full terms of the side agreement and of the letter of guarantee, both dated 15th August 2005, are set out in Appendices II and III respectively to this judgment. The Claimants say that these agreements take effect in accordance with their express terms. The Defendants say that these documents do not record the real agreement which was made at that time between the relevant parties. The Defendants say that the relevant parties made a quite different agreement and that they then agreed that they would bring into existence and execute documents in the form of the side agreement and the letter of guarantee, not for the purpose of recording the real agreement, and not so as to be bound by the terms of the written agreements, but to create documents which could be used by Ross River to misrepresent the position to others, in particular, to the relevant tax authorities. In short, the Defendants say that the written documents are a sham.
161.	The Defendants submitted that the legal principles which I should apply are stated in the judgment of Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802 and in the recent decision of the Supreme Court in Autoclenz Ltd v Belcher [2011] UKSC 41, [2011] 4 All ER 745.
162.	Diplock LJ’s description of a sham in Snook is very well known and I need not quote it. The essential point made in his judgment at page 802 was that for there to be a sham all the parties to the alleged sham had to intend the document to be a sham. It was not enough for one or some of the parties to have that intention if the other or others intended the document to be a genuine record of their agreement. Diplock LJ described a document as a sham when it was intended by the parties to give to third parties, or to the court, the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intended to create.
163.	Autoclenz Ltd v Belcher involved a contract between a car cleaning company and a valeter. The valeter said that he was employed by Autoclenz under a contract of employment. Autoclenz pointed to an agreement signed by the valeter and submitted that on the true construction of that agreement, the valeter was an independent contractor. The issue before, initially, the Employment Tribunal and, ultimately, the Supreme Court was as to the identification of the terms of the contract which governed the relationship of the parties. Were they exclusively set out in the written agreement or were they contained elsewhere and in terms which contradicted the written agreement and prevailed over it? The judgment of the Supreme Court was given by Lord Clarke, with whom the other members of the Court agreed.
164.	Lord Clarke identified the question at [17] as being whether and in what circumstances the court could disregard terms included in a written agreement and conclude that the documents did not reflect what was actually agreed between the parties or the true intentions or expectations of the parties. He then cited passages in the judgment in the Court of Appeal in Autoclenz and stated that he did not intend to alter those principles which applied to commercial contracts. He then referred to a body of case law in the context of employment contracts “in which a different approach has been taken”. He referred to cases where the courts had held that the Employment Tribunal should adopt a test that focused on the reality of the situation where the written documentation might not reflect the reality of the relationship.
165.	At [23], Lord Clarke referred to Diplock LJ in Snook, to passages in the speeches in the House of Lords in Antoniades v Villiers [1990] 1 AC 417 at 456, 466, 467 and 477 and to Arden LJ in Bankway Properties Ltd v Pensfold-Dunsford [2001] 1 WLR 1369 at [42] – [44]. A sufficient example of the passages referred to in Antoniades is from the speech of Lord Templeman at 456 where he said of the written terms in that case:
“As to the nature of those rights and obligations, the provisions  … could be seen, in all the circumstances to be repugnant to the true purpose of the agreement. No one could have supposed that those provisions were ever intended to be acted on. They were introduced into the agreement for no other purpose than as an attempt to disguise the true character of the agreement which it was hoped would deceive the court and prevent the appellants enjoying the protection of the Rent Acts.”
The passage in Arden LJ’s judgment in Bankway dealt with cases where the provision in question was designed to evade the operation of a statute, out of which the parties could not contract, and where the court had to determine the substance and reality of the transaction.
166.	In Autoclenz at [34], Lord Clarke referred to the difference between an ordinary commercial dispute and the type of case he was considering. The difference related to the inequality in bargaining power in an employment context. In the event, having regard to detailed findings of fact made by the Employment Tribunal, the Supreme Court identified the relevant terms of the contract in that case and having done so held that the written document did not reflect the true agreement between the parties.
167.	The present case is not like the situation considered in Autoclenz. The present case involves a commercial contract which Lord Clarke stressed gave rise to different considerations. Further, there was no inequality of bargaining power in the present case.
168.	The Defendants say that I should examine the evidence in this case with a view to seeing what the real bargain was. It is submitted that I should find that the relevant parties made a bargain which they intended to bind them and which was not expressed in the written documents. The suggested reason why the parties signed documents which did not record the real agreement, and which therefore they did not comprehensively set down, was that Ross River wished to have documents which it could show to the tax authorities and WCL and Mr Barnett and Mr Harney were prepared to go along with that. Accordingly, although the Defendants draw my attention to Autoclenz, they are in essence relying on the concept of sham which was described in Snook.
169.	In the course of their submissions, the Defendants helpfully drafted the document which they said represented the real agreement which had been reached in August 2005. The essential terms of that document were as follows:
(1)	the parties were Ross River, WCL, WDL, Mr Barnett, Mr Harney, Mr and Mrs York and York Construction (Cambridge) Ltd (“YCCL”);
(2)	Ross River agreed to lend £200,000 to Mr Harney;
(3)	Ross River agreed to lend £125,000 to WDL;
(4)	The above loans to Mr Harney and to WDL were to be made by transferring a single sum of £325,000 to WCL which would then forward £200,000 to Mr Harney and £125,000 to WDL;
(5)	When Mr Harney received his £200,000 he would pay £142,500 to Mr and Mrs York; that payment would discharge Mr Harney’s earlier liability to YCCL (which had been in the sum of £142,500);
(6)	Mr Harney should repay the loan of £200,000 together with interest by paying to Ross River £400,000 by the later of two dates, namely, the dates of the conclusion of the development projects at Ampthill and at Ashfield Grange;
(7)	The payment by Mr Harney to Ross River of £400,000 should be made through WCL which would forward Mr Harney’s payment to Ross River;
(8)	WDL should repay to Ross River the loan of £125,000 together with interest in the sum of £35,000 making a total of £160,000; this was to be paid at the earlier of the conclusion of the Ashfield Grange project or 15th August 2005;
(9)	The payment by WDL to Ross River of £160,000 should be made through WCL which would forward WDL’s payment to Ross River;
(10)	Each of Mr Barnett and Mr Harney guaranteed that he would pay to Ross River (through WCL) up to the sum of £80,000 (being 50% of the said £160,000), being £62,500 plus interest of £17,500, in the event that, and to the extent that, WDL defaulted on its payment of £160,000;
(11)	The repayment to Ross River of the said £160,000 pursuant to the guarantees should be made through WCL which would forward the repayment to Ross River;
(12)	For the avoidance of doubt nothing in the agreement should affect the entitlements to proportions of Net Profits in the JVA.
170.	A key feature of the agreement as put forward in the course of the Defendants’ submissions is that the party obliged to pay the sum of £400,000 to Ross River is Mr Harney and the principal party obliged to pay the sum of £160,000 to Ross River is WDL. Mr Barnett and Mr Harney also have a secondary liability as guarantors of WDL’s liability to pay Ross River. WCL is not liable to pay £400,000 or £160,000 to Ross River save that, presumably, if Mr Harney paid his £400,000 to WCL for onward transmission to Ross River, WCL would be liable (to someone  - whether it be Ross River or Mr Harney or both of them) to make that payment to Ross River. The same situation would apply in the event that WDL paid its £160,000 to WCL for onward transmission to Ross River.
171.	Although the side agreement has not been well drafted, clauses 2 and 3 appear to proceed on the basis that the party liable to pay the sum of £235,000 (grossed up in the way described) is WCL. The Side agreement is perhaps less clear about the obligation to repay the capital of £325,000 and who is to repay that sum. However, clauses 1 and 4 of the Side agreement, fairly read, appear to provide for WCL to pay that sum to Ross River. Further, the terms of the guarantee of 15th August 2005 can be relied upon as an aid to interpretation of the Side agreement and those terms support the construction of the Side agreement whereby the obligation to make the relevant payments to Ross River is imposed on WCL. In any case, WCL does not argue that the Side agreement and the guarantee can be construed to produce the result that liability to repay the moneys is on Mr Harney and on WDL, but not on WCL. That is why WCL has to argue, and does argue, that the real agreement was different from the written documents, which are a sham.
172.	Thus the real area of contention in relation to the side agreement is whether the relevant parties in reality agreed that Ross River was entitled to be paid by WCL, and no one else, or (conversely) that Ross River was entitled to be paid by Mr Harney and by WDL (with its obligation guaranteed by Mr Barnett and Mr Harney in two separate guarantees of £80,000 each) but so that Ross River has no claim against WCL.
173.	The negotiations in relation to the transaction which led to the parties entering into the side agreement appear to have begun in July 2005. In July and August 2005, there are a number of documents internal to the Ross River side of the transaction which refer to the proposed transaction. These documents are only relevant to the agreement which was ultimately arrived at between the parties in so far as (1) they record communications which had taken place between the parties, or (2) they show something as to Ross River’s motive which might help the Defendants argue that Ross River intended to create documents which would be misleading. In fact, these internal communications do not seem to me to show anything in the second category. As to the first category, it is clear that Mr Barnett was “sticky” about becoming responsible for Mr Harney’s debts. That attitude, which was entirely to be expected, is also revealed by some of the documents which passed between the parties to which I will refer below.
174.	The documents which passed between the parties are as follows:
(1)	8th August 2005 – Mr Barnett to Mr York and Mr Harney; this shows that Mr Barnett expected that WCL would be liable to repay to Ross River at least some of the monies in question;
(2)	9th August 2005 – Mr Carr to Mr Barnett and Mr York: this is a detailed document which proceeds on the basis that the monies in question are payable by WCL to Ross River;
(3)	10th August 2005 – there are several emails between the parties; these show that Mr Barnett had considered Mr Carr’s explanation of 9th August 2005; 
(4)	10th August 2005 - Mr Barnett emailed Mr Harney raising points about the extent of WCL’s liability; Mr Barnett seemed to want a position where WCL would not be liable for all of the repayment although it would be liable for some of it; Mr Barnett discussed the matter with Mr Harney and emailed Mr Carr (timed at 11.19) making a similar point; 
(5)	10th August 2005 - Mr Barnett then had a conversation with Mr Carr and emailed him (timed at 12.24); in that email Mr Barnett again appeared to accept that WCL would be liable for at least some of the repayment and discussed the ultimate liability of himself and Mr Harney;
(6)	11th August 2005 – following a conversation between Mr York and Mr Barnett, Mr Carr sent an email to Mr Barnett, Mr Harney and Mr York enclosing a draft side agreement and a draft guarantee; these documents, on their true construction, obliged WCL to make the payments in question to Ross River;
(7)	12th August 2005 – Mr Barnett emailed Mr Carr, Mr Harney and Mr York commenting in some detail on Mr Carr’s draft documents; Mr Barnett did not object to the draft documents imposing on WCL the liability to pay Ross River;
(8)	12th August 2005 – Mr Carr emailed Mr Barnett, Mr Harney and Mr York dealing with Mr Barnett’s points in his email of 12th August and enclosing revised drafts;
(9)	15th August 2005 – there were further emails between the parties and Mr Barnett required a further correction to the draft documents. 
175.	Mr Carr gave evidence and was cross-examined in relation to the negotiations for the side agreement. There is nothing in his evidence to provide any support for the Defendants’ case that the parties made one agreement which was deliberately not recorded in the written documents.
176.	Mr York gave evidence and was cross-examined in relation to the negotiations for the side agreement. There is nothing in his evidence to provide any support for the Defendants’ case that the parties made one agreement which was deliberately not recorded in the written documents.
177.	Mr Barnett gave evidence and was cross-examined in relation to the negotiations for the side agreement. In his witness statement of 10th June 2011, he referred to two particular conversations which he said that he had. The first of these was allegedly with Mr Carr on 10th August 2005 and the second was allegedly with Mr York on 11th August 2005. Mr Barnett said that in the first conversation, Mr Carr told him that WCL “itself would not be held liable for the debt and the agreement was merely window-dressing to comply with the off-shore set up”. Mr Barnett said that in the second conversation Mr York told him that “the proposal was simply a means to assist his tax planning and that neither Waveley nor I would be held liable for Mr Harney’s indebtedness”. So far as I can see neither of these alleged statements was put to Mr Carr nor Mr York in the course of cross-examination.
178.	In the course of his cross-examination, Mr Barnett said that he had been assured that the side agreement would not be enforced against WCL. He also said that when he wrote his email of 10th August 2005 to Mr Carr, suggesting that it was not for WCL to secure the transaction, and then he later had a conversation with Mr Carr, “Mr Carr did not say anything”: Day 7, transcript pages 36 and 37. That seems to me to contradict the passage in his witness statement that Mr Carr gave him a relevant assurance about the non-liability of WCL.
179.	Mr Barnett’s evidence about the assurances he had received or what was “understood” by the parties was also contradictory. At times in his evidence he said that the arrangement was that WCL would be liable to pay Ross River if and to the extent that Mr Harney repaid to WCL the sums advanced to him but that WCL would not be liable to pay Ross River if Mr Harney did not pay WCL. That seems to be a different assurance or understanding from the one alleged in his witness statement.
180.	Further, Mr Barnett’s case that it was expressly agreed that the side agreement was mere window dressing which would not have legal effect does not sit well with the known fact that Mr Barnett studied the various drafts of the side agreement and guarantee and suggested amendments to the drafts. If it had been agreed that the documents did not accurately record the true agreement between the parties and that the sole purpose of the executed documents was to mislead the tax authorities, then I find it difficult to see why Mr Barnett would have wished to alter the wording of the drafts.
181.	I specifically reject Mr Barnett’s evidence that he had any assurance from Mr Carr or Mr York or anyone else that the side agreement would not be enforced against WCL. I have found Mr Barnett to be an unreliable witness generally. In relation to his evidence about the side agreement negotiations, I find that his evidence was knowingly untrue. Further, I do not accept that Ross River ever agreed with WCL or Mr Barnett that WCL’s expressed liability would be subject to an unexpressed limitation that WCL was only to be liable to the extent that Mr Harney paid WCL.
182.	It follows that I find that the only agreement made between the relevant parties in or around August 2005 was the agreement recorded in the side agreement and the guarantee. 
183.	There are other features of the side agreement which need to be addressed.  Clause 1 of that agreement stated that Ross River “introduced capital” of £325,000 into WCL. That is not an accurate description of what occurred. The sum involved was not for the use of WCL but was intended to be paid over by WCL to Mr Harney and to WDL.
184.	It was also alleged by Mr Barnett that the reference to the introduction of capital and the provision for £235,000 to be paid as a Prior Profit Allocation was a means of disguising the fact that the £235,000 was interest on a loan. Mr Carr and Mr York were quite clear in their evidence that the £325,000 was a loan and the £235,000 was in the nature of interest. The Defendants contended that these misdescriptions were to assist Ross River in misleading the tax authorities. Although the Defendants alleged that there was a different tax treatment of interest on a loan and a profit earned in a property development, they did not show me any material on which I could make reliable findings on that subject.
185.	Even if it is accepted that the loan of £325,000 had been misdescribed as an introduction of capital into WCL and even if the interest payment of £235,000 had been disguised and that this misdescription and disguise had been for the purposes of misleading the tax authorities, it does not follow that the side agreement and guarantee were of no effect as a sham. I consider that if there had been misdescription and disguise, the court ought to correct those matters and give effect to the agreement on the basis of its true nature and effect. None of that would entitle the court to disregard the liability of WCL to pay sums of money to Ross River and to hold that WCL was under no liability to pay Ross River.
186.	Other points were debated in relation to the side agreement and guarantee. In view of my earlier findings it is neither necessary nor appropriate:
(1)	to discuss any question about whether those in control of Ross River in the Isle of Man should be taken to have the same knowledge and intentions as Mr Carr and Mr York;
(2)	to discuss the way in which the terms of the side agreement were discussed in the accounts of Ross River and Blue River;
(3)	to consider whether a payment of £125,000 made by WDL to WCL was a repayment of the loan of £125,000 to WDL and/or whether that meant that WCL, having received that repayment, is under an obligation to pay that sum to Ross River;
(4)	to refer to the correspondence in which it appeared to be recognised that WCL/Mr Barnett were liable to Ross River for £160,000;
(5)	to comment on the fact that the allegation of sham was raised at a late stage in the history.
187.	In their Counterclaim, the Defendants sought rectification of the side agreement and guarantee so that it expressly provided that WCL was not liable under them. In view of my findings of fact, that claim fails. In any event, no claim for rectification was put forward by the Defendants in their closing submissions.
188.	Having decided that the side agreement takes effect in accordance with its terms, a number of points of interpretation now need to be considered. I have already indicated that the side agreement is not well drafted, as the following discussion reveals.
189.	Before explaining the problems created by the wording of the side agreement, it is worth standing back to consider, in general terms, the financial position of Ross River and of WCL before and after the side agreement. Before the side agreement, Ross River was entitled to a Development Profit of 1/3 of  Net Profits. If the Net Profits turned out to be (for example) £1.5m, then the Development Profit would be £0.5m. Under the side agreement, Ross River was in effect making a loan of £325,000 on which it was to receive interest of £235,000. One might have expected that what needed to be agreed was that WCL would pay to £325,000 plus £235,000 plus 1/3 of Net Profits of, say, £1.5m i.e. £0.5m. Those figures total £1,060,000. On that basis WCL would have to dip into its remaining 2/3 of Net Profits to repay the capital, plus interest, in the sum of £560,000.
190.	What seems clear from the Side agreement was that the parties did not provide that WCL was to pay £325,000 plus £235,000 plus, say, £500,000. Indeed, the parties treated the sums of £325,000 and £235,000 in different ways. In a case where Development Profit was payable, the figure of £235,000 was to be grossed up but the figure of £325,000 was not to be grossed up.
191.	The issues of construction require the court to construe the side agreement and, to some extent, the JVA. For the purpose of construing the side agreement, it seems to me that it is permissible to take into account, as an aid to construction, the two page document sent under cover of Mr Carr’s email of 9th August 2005 which was intended to illustrate the intended workings of the side agreement in relation to the sums of £325,000 and £235,000.
192.	I will begin by considering the sum of £325,000. Clauses 1 and 4 of the side agreement provide that WCL is to repay £325,000 to Ross River. The side agreement does not provide for the sum of £325,000 to be grossed up. Clause 4 of the side agreement provides that the £325,000 is to be repaid “from Development Profit”. Development Profit is not defined in the side agreement. The side agreement does not provide that definitions in the JVA are to apply to the side agreement. Normally one would expect that a term defined in the JVA would also apply in a side agreement which is intended to operate in tandem with the JVA. Development Profit is defined in the JVA but so as to refer to Ross River’s share of Net Profits. The parties cannot have intended that Ross River would be “repaid” the sum of £325,000 which it had advanced out of a sum which was independently payable to it. That would involve WCL paying its debt to Ross River with Ross River’s own money. It follows that Development Profit in clause 4 of the side agreement cannot be a reference to Ross River’s share of Net Profits. Further, it is clear from the JVA that when calculating Net Profits under the JVA one does not deduct the sum of £325,000 from the gross receipts of the venture; that sum was not incurred in relation to the joint venture. Further, Mr Carr’s illustration, to which I have referred, shows the sum of £325,000 being paid by WCL out of its cash flow and therefore essentially out of its 2/3 share of profits. Accordingly, I conclude that the sum of £325,000 is payable by WCL and that the sum of £325,000 is not deducted from gross receipts for the purpose of considering the Net Profits or Development Profit.
193.	What then of the sum of £235,000? As I have indicated, it would have been simplest to treat this in the same way as the £325,000. However, it is plainly treated differently from the £325,000. Clause 3 of the side agreement provides for the sum of £235,000 to be grossed up. This is only justified if the grossed up sum of £352,500 is deducted from gross revenues for the purpose of calculating Net Profits and Development Profit. Thus using £1.5m as the figure of gross revenues, the sum of £352,500 is deducted from £1.5m leaving £1,147,500 as Net Profits and leading to a Development Profit of 1/3 i.e. £382,500. Thus the way in which the parties intended to produce a result whereby Ross River received £325,000 plus £235,000 plus £500,000 (totalling £1,060,000) was to provide for Ross River to receive £325,000 plus £352,500 plus £382,500 (totalling £1,060,000).
194.	A question then arises as to how the side agreement operates following the execution of the Third Supplemental Agreement in 2006. That agreement was expressed to be supplemental to the JVA and earlier supplemental agreements (of 31st October 2005 and 14th February 2006). Thus, the Third Supplemental Agreement is not supplemental to the side agreement of 14th August 2005. Clause 3 of the Third Supplemental Agreement states the earlier agreements (but these do not include the side agreement) continue in full force and effect.
195.	Against that background, one has to consider how to interpret and apply clause 3 of the side agreement. Clause 3 contains two sentences which considered individually might produce different results. The first sentence refers to grossing up to reflect Ross River’s entitlement under the JVA. Under the original terms of the JVA, Ross River’s entitlement was to a Development Profit of 1/3 of Net Profits. Under the terms of the JVA as varied by the Third Supplemental Agreement, which applies at the time that the calculation of Development Profit is to be carried out, Ross River is to be entitled to 40% of Net Profits. If £235,000 is grossed up by reference to the original terms of the JVA, the figure is £352,5000. If £235,000 is grossed up by reference to the varied terms of the JVA, the figure is £391,667 (odd). If the matter rested with the first sentence of clause 3 of the side agreement, I consider that the argument in favour of the higher figure is much stronger than the rival argument. The second sentence of clause 3 of the side agreement must now be considered. That says, in effect, that £235,000 shall be grossed up to £352,500. thus if one adopts what I regard as the weaker argument for the meaning of the first sentence, then the first and second sentences are consistent. If one adopts what I regard as the stronger argument for the meaning of the first sentence then prima facie the two sentences produce different results. This prima facie position would be altered if one treats the second sentence as simply an illustration of the operation of the first sentence. That illustration was of course accurate at the date of the side agreement. It became arguably inaccurate when Ross River’s share of Net Profits changed from 1/3 to 40%. It could therefore be argued that one can give effect to the stronger argument as to the meaning of the first sentence and simply disregard the illustration in the second sentence because it has been invalidated by a later change in circumstances pursuant to the Third Supplemental Agreement.
196.	If one grosses up to £352,000, pays that sum to Ross River under clause 3 of the side agreement, then deducts that sum from the gross revenues to arrive at Net Profits and then calculates a Development Profit of 40% of Net Profits, one arrives at a result where part of the interest of £235,000 is paid out of Ross River’s own entitlement to Development Profit. This can be illustrated as follows. If the underlying intention was that Ross River should receive £325,000 plus £235,000 plus 40% of gross revenues of say £1.5m, i.e. £600,000 (totalling £1,160,000) one ends up with £325,000 plus £352,500 plus 40% of (£1.5m - £352,500) i.e. £459,000 (totalling £1,136,500).
197.	The result identified in the last paragraph is not a sensible commercial result. It might be said that it follows because the parties did not amend the figure of £352,500 in the side agreement when they entered into the Third Supplemental Agreement. Rectification is not claimed in relation to the Third Supplemental Agreement. In my judgment, the wording of clause 3 can be, and should be, in accordance with settled principles of construction (see Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900), interpreted to produce a sensible commercial result. One should read the first sentence of clause 3 of the side agreement in accordance with the stronger argument identified above to apply to the state of affairs at the time the calculation is to be done. One should then read the second sentence of clause 3 of the side agreement as an illustration which was accurate at the date of the side agreement but which has ceased to be accurate by reason of later events and, being inaccurate, should not continue to be adopted. 
198.	There is a further issue which arises under the side agreement. When is WCL obliged to repay £325,000 and the Prior Profit Allocation? Are these sums only payable when the amount of the Net Profits or the amount of the Development Profit have been ascertained? The figure of £325,000 is fixed and the calculation of the Prior Profit Allocation does not depend on being able to ascertain the amount of the Net Profits or the Development Profit. The same applies to the grossing up of the figure of £235,000. Clause 4 states that the sums are to be paid “once the Composite Site … is fully sold or let…”. That suggests that when the Composite site is fully sold or let, the sum of £325,000 becomes payable. However, clause 4 also states that the repayment of the £325,000 and the grossed up figure in place of 235,000 is to “take place from the Development Profit”. I have already explained that the reference to Development Profit is essentially to the Net Profits. It seems to me that the sums payable under the side agreement are not payable until it is clear that the Net Profits will exceed the sums which are payable. When that is clear, then those sums become due and payable.
The JVA: the alleged implied terms
199.	The Claimants say that there are to be implied into the JVA two implied terms about how WCL, Mr Barnett and Mr Harney were to behave during the period of the joint venture. The Claimants pleaded that these implied terms were obvious and/or necessary to give business efficacy to the JVA.
200.	I will set out the implied terms which were asserted by the Claimants in the course of the trial. I will set them out in a different order to the way in which they appear in the Claimants’ pleadings.
201.	The first implied term was as follows:
“ Until [WCL] had paid to Ross River and/or Blue River LP the Standard Sale Price and Basic Profit or Development Profit (as applicable) [WCL] would (and Mr Barnett and Mr Harney would procure that [WCL] would) conduct no business other than that necessary for the implementation of the development which was the subject of the JV Agreement.”
202.	The second implied term, as originally pleaded was:
“[WCL], Mr Barnett and Mr Harney would take no action that would prejudice or hinder the ability of [WCL] to pay to Ross River and/or Blue River LP the Standard Sale Price and Basic Profit or Development Profit (as applicable) to which Ross River and/or Blue River LP would in due course become entitled, and which [WCL] would in due course be liable to pay, under the JV Agreement.””
203.	The second implied term, as pleaded following amendment was:
“[WCL], Mr Barnett and Mr Harney would take no action that would prejudice or hinder the ability of [WCL] to pay to Ross River and/or Blue River LP the Development Profit and any other sums to which Ross River and/or Blue River LP would in due course become entitled, and which [WCL] would in due course be liable to pay to them out of the Net Profits.”
204.	Before considering whether it is appropriate to imply any of the above terms, it is necessary to have regard to the express terms of the JVA.
205.	The parties to the JVA were Ross River (referred to as “YDLP”), WCL (referred to as “the Promoter”), Mr Barnett (referred to as “PCB”) and Mr Harney; Mr Barnett and Mr Harney were together referred to as “the Guarantors”. Many of the provisions of the JVA referred to “the parties”, which was not a defined term. The Claimants submitted that because Mr Barnett and Mr Harney executed the JVA they were “parties” to it and so whenever the JVA referred to “the parties”, the reference included Mr Barnett and Mr Harney. In particular, it was submitted that Mr Barnett and Mr Harney had agreed in clause 2.6 that the JVA was a joint venture agreement and that Mr Barnett and Mr Harney personally had the objectives referred to in clause 3. The Claimants put forward the argument that Mr Barnett and Mr Harney were included in the phrase “the parties” so that it would be easier to argue that Mr Barnett and Mr Harney had taken on, impliedly, further personal obligations and also to argue that, because they were parties to a joint venture, they personally owed fiduciary obligations.
206.	In my judgment, an interpretation of the JVA whereby every reference in it to “the parties” includes Mr Barnett and Mr Harney is an improbable one. There are many references to matters being agreed between the parties where one would expect that the agreement of WCL with Ross River would suffice, without there being a need to obtain the further agreement of Mr Barnett and Mr Harney. Mr Barnett and Mr Harney were shareholders in WCL. Mr Harney was a minority shareholder. It seems improbable that anyone would have wanted the operation of the JVA to depend upon obtaining the agreement of Mr Harney in addition to the agreement of WCL. Further, it cannot have been intended that the agreement of Mr Barnett and Mr Harney would be required at a time after, say, Mr Harney had ceased to own shares in WCL. In my judgment, many (at least) of the provisions of the JVA which refer to “the parties” should be construed as referring only to Ross River and WCL and not to Mr Barnett and Mr Harney. Further, the specific and limited terms of clauses 11.4 and 11.5 of the JVA, where Mr Barnett and Mr Harney took on express personal obligations tend to emphasise the probability that Mr Barnett and Mr Harney executed the JVA for the limited purpose of entering into those limited obligations and not for the purpose of taking on all the obligations, and being given all the rights, which would be the case if every reference to “the parties” was interpreted to include Mr Barnett and Mr Harney.
207.	It is necessary to consider the meaning of clause 10.5 of the JVA. This sub-clause provides:
“ the Development profit will be payable by the Promoter to YDLP at such times and in such manner as the parties agree consistent with the Objectives but in the event of any disagreement as determined by the Expert Accountant pursuant to clause 15 But Provided Always no party shall receive Development Profits in advance of the other and the Development Profit will be distributed as soon as practicable following receipt”
208.	On any view, clause 10.5 is difficult to interpret. The first part of it, down to “But…” appears relatively easy to understand. Thereafter, the clause presents difficulties. It will be remembered that Development Profit (in the singular) is defined as Ross River’s 1/3 share of Net Profits. Under the JVA, WCL does not receive Development Profit. It simply retains what is left after it pays Development Profit to Ross River. But, clause 10.5 refers to “Development Profits” in the plural and seems to contemplate that WCL as one of the parties will receive Development Profits. Further, the clause refers to Development Profit being distributed whereas, on the ordinary meaning of the JVA, Development Profit is not to be distributed but rather all of it is to be paid to Ross River.
209.	Notwithstanding the obvious difficulties with clause 10.5, the court must seek to give effect to it. It seems to me that it is necessary to read “Development Profits” and “Development Profit” where those two phrases last appear in clause 10.5 as if they were referring to the profits of the development, that is, what is left when one takes away development expenditure from development receipts. That is essentially the same as Net Profits as defined in the JVA. Further, the words “shall receive” and “following receipt” are not well chosen. The phrase “following receipt” suggests that the Net Profits are to be distributed as soon as practicable following their receipt by WCL. If that is so, what is the meaning of the first part of the proviso which states that no party (therefore including WCL) is to “receive” its share of Net Profits before the other party? In this part of the proviso, the word “receive” cannot be referring to WCL, running the development, and receiving revenue from it. The reference to WCL receiving its share of Net Profits must be a reference to something else. The most obvious thing would seem to be that WCL is not to use the receipts from the development for its own purposes in advance of paying to Ross River its share of Net Profits, i.e. the Development Profit.
210.	There is a further difficulty with clause 10.5. Strictly speaking, the Development Profit cannot be calculated until the Net Profits are calculated and Net Profits cannot be finally calculated until one has ascertained all the revenues from the disposal of the Composite Site and all the expenditure incurred in achieving such revenues. This would suggest that no sum is payable to Ross River by way of Development Profit until the final calculation is carried out. If Clause 10.5 is read in that light, then the result is a curious one. The first part of clause 10.5 would seem to say that Development Profit is payable to Ross River at such times as are agreed or determined. But if Development Profit cannot be paid until it is finally calculated, then it would seem obvious that Development Profit is to be paid straightaway once it has been calculated. What would there be left to agree or determine?
211.	In my judgment, what the parties were attempting to do in clause 10.5 was to provide for payments to be made on account of Development Profit as the development proceeded. There is no doubt that the parties could have reached agreement on that subject from time to time. If they did not agree, an expert could determine what sum should be paid to Ross River on account of the final entitlement to Development Profit. The expert would no doubt take into account, acting prudently, what provision there should be for future expenditure, to ensure that WCL was not required to make too large a payment on account which might put WCL in difficulties later in paying costs and expenses incurred in the remainder of the development period. If clause 10.5 is read in that way, then the proviso makes reasonable sense. In particular, the proviso has the effect that WCL is not to draw upon the revenues from the development for its own purposes unless and until it has paid to Ross River on account of its entitlement to a share of Net Profits. In other words, WCL can draw on the revenues for its own purposes on account of its future right to retain a part of the Net Profits but only if WCL has paid to Ross River an appropriate figure on account of Ross River’s entitlement.
212.	Although clause 10.5 is not easy to construe and although I reach my conclusions with some hesitation, in my judgment, clause 10.5 is to be construed as I have attempted to explain.
213.	The above construction of clause 10.5 is relevant in at least two potential ways. The first potential way is that the Claimants might have sought to rely upon clause 10.5, as so construed, in these proceedings. Because Ross River has not at any time received any payment on account of Development Profit, the Claimants might have alleged that any time that WCL used the revenues from the development for its own purposes it was acting contrary to the proviso to clause 10.5. However, clause 10.5 is not relied upon and not even referred to in the Claimants’ pleadings. In the course of argument, it emerged that the above interpretation of clause 10.5 might be the one which found favour with the court but yet the Claimants never sought to amend their pleadings to rely upon clause 10.5, construed in that way.
214.	The second potential way in which clause 10.5, so construed, might be relevant is in relation to the suggested implied terms. I will have to consider later whether clause 10.5 so construed produces the result that it is not appropriate to imply either of the suggested terms.
215.	I also need to consider the operation of clause 12.3.5 of the JVA. This sub-clause is in clause 12 dealing with completion of the sale of the Shell Site. Clause 12.3.5 provides that “at completion”:
“If YDLP has elected to receive the Development Profit the parties will endeavour to agree the method and manner of payment of the Development Profit and the means to secure payment to YDLP in the meantime and failing agreement the matter in dispute will be referred to the Expert Surveyor”
216.	Clause 12.3.5 expressly contemplates that Ross River might be able, at the time that it transfers title to the Shell Site to WCL, not only to ask for agreement as to the method and manner of payment of the Development Profit but also to ask for security for WCL’s future obligation to pay Development Profit to Ross River. If the parties agree about the security to be provided, then no doubt, they will agree that security will be provided. If they fail to agree on the method of providing security, then an expert can be asked to determine the appropriate method by which security is to be provided. The sub-clause does not spell out that WCL comes under an obligation to provide security in that way but the sub-clause only makes sense if WCL is under an obligation to provide security by the method determined by the expert. Although I can see that difficulties might arise if the parties disagreed about the method of providing security and their disagreement had to be referred to an expert and that held up completion of the Shell Site, nonetheless the above is what clause 12.3.5 clearly provides.
Implied terms: the law
217.	Having considered the express terms of the JVA into which the Claimants say further terms are to be implied, I should next consider the legal principles to be applied in relation to the suggested implication of terms.
218.	Until recently, a discussion of the legal principles in this area would normally involve a discussion of whether the suggested term was necessary to give business efficacy to the contract and whether the suggested term was obvious. Indeed, that is how the matter is put in the Claimants’ pleadings. Before me all parties accepted that I should apply the relevant legal principles set out in the decision of the Privy Council in Attorney General of Belize v Belize Telecom [2009] 1 WLR 1988. Although that is a decision of the Privy Council, the statements of principle contained in it have regularly been followed by the courts in this jurisdiction; see, for example, Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc [2009] 1 All ER (Comm) 411 and Crema v Cenkos Securities plc [2011] 1 WLR 2066.
219.	The judgment of Lord Hoffmann in the Belize case needs careful study but for present purposes, I need only set out the summary of that judgment contained in Crema v Cenkos Securities plc [2011] 1 WLR 2066 at [38] and [39] per Aikens LJ, where he said:
“38 The principles are: (1) a court cannot improve the instrument it has to construe to make it fairer or more reasonable. It is concerned only to discover what the instrument means. (2) The meaning is that which the instrument would convey to the legal anthropomorphism called “the reasonable person”, or the “reasonable addressee”. That “person” will have all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed. The objective meaning of the instrument is what is conventionally called the intention of “the parties” or the intention of whoever is the deemed author of the instrument. (3) The question of implication of terms only arises when the instrument does not expressly provide for what is to happen when some particular (often unforeseen) event occurs. (4) The default position is that nothing is to be implied in the instrument. In that case, if that particular event has caused loss, then the loss lies where it falls. (5) However, if the “reasonable addressee” would understand the instrument, against the other terms and the relevant background, to mean something more, ie that something is to happen in that particular event which is not expressly dealt with in the instrument's terms, then it is said that the court implies a term as to what will happen if the event in question occurs. (6) Nevertheless, that process does not add another term to the instrument; it only spells out what the instrument means. It is an exercise in the construction of the instrument as a whole. In the case of all written instruments, this obviously means that term is there from the outset, ie from the moment the contract was agreed, or the articles of association were adopted or the statute was passed into law. 
39 Lord Hoffmann went on to make two further points, at paras 21–27. The first is that the phrases which courts have used as “tests” to decide whether a term should be implied (eg that the term is necessary to give “business efficacy” to the contract, or that the term is one that was “obvious”) can detract from the task that the court has to undertake. That is to see whether the proposed implication spells out what the instrument would reasonably be understood to mean. Lord Hoffmann emphasised that those tests are not freestanding. Secondly, the oft-expressed requirement that an implied term must not just be reasonable but be “necessary” simply reflects the requirement that the court has to be satisfied that the term must be implied because that is what the contract must mean.”
Implied terms: discussion and conclusions
220.	I will now consider the implied terms which are contended for in this case. In the first instance, I will consider whether such terms should be implied in relation to the obligations of WCL. I will then, separately, consider whether such terms should be implied in relation to the obligations of Mr Barnett and Mr Harney.
221.	The first term imposes a negative obligation on WCL not to conduct any business other than that necessary for the purposes of the implementation of the development, the subject of the JVA. This is a far reaching term. The Claimants’ purpose in contending for this term is to produce a situation where WCL would have received the revenues from the development and would not have spent any part of those revenues on anything other than the development because (by reason of the implied term) WCL would not have any other business in which it might spend any part of the revenues from the development. In other words, the purpose which the Claimants say is served by the implied term is the safeguarding of the revenues from the development. If they were not spent by WCL on any other business, then there would be a better chance that they would remain available to WCL which would then be able to meet its obligations to pay the Development Profit to Ross River when the time came. If WCL did not perform the obligation imposed by the suggested implied term and as a result WCL was not in a financial position to pay Ross River when the time came, then WCL would be liable not only in debt (for the Development Profit) but would also be liable for damages for breach of the implied term. The amount of the damages would be the amount of the unpaid debt.
222.	The Claimants say that this term should be implied because it was always contemplated that WCL would be “a single purpose vehicle” or “SPV”. It is not suggested that anyone, in the course of negotiating the JVA, ever said that WCL would be an SPV. It is correct that Mr Barnett said that WCL would be a “newco” but, in my judgment, a correct statement that WCL would be a newco does not carry with a promise that WCL would be a SPV. 
223.	On the facts, WCL did not carry out any other development. Nor did it really carry on any other business except if one includes in that phrase the use of its cash resources to make loans to others. Indeed, one of the loans which WCL made was when it passed on to Mr Harney and to WDL the monies advanced by Ross River; in that instance, WCL’s actions were with the express agreement of Ross River pursuant to the side agreement. The Claimants submit that that transaction does not weaken their arguments in favour of this implied term because the side agreement was a permitted departure from the otherwise applicable implied term.
224.	In my judgment, the court ought not to imply the first suggested term. It would be a far reaching term. Contrary to the Claimants’ contentions, there is no support for it in the negotiations leading up to the JVA. Further, a claim against WCL for damages for breach of the implied term would not add anything worth having to a claim against WCL in debt in the event that the Development Profit was not paid. Applying the approach in the Belize case, there is nothing in the JVA construed against all relevant background which would enable me to find that the parties meant the JVA to prevent WCL from carrying on any other business. The suggested term is not obvious and it is not necessary to give business efficacy to the JVA.
225.	Although the original version of the second suggested implied term has now been abandoned, I will consider the arguments in relation to it. It will be noted that the term as originally put forward referred to WCL paying the Standard Sale Price plus the Basic Profit as well as the possible Development Profit. The Claimants’ purpose in putting forward this implied term was to impose an obligation on WCL not to take action which would prejudice its ability to pay its debts when they fall due. The suggested implied term has very wide implications in the law of contract. If the court were to imply such a term in the present case, it is difficult to see why the court would not be ready to imply a similar term in every case of a contract which requires one party to pay a debt to the other. In such cases if the potential debtor were to dissipate its assets in a way which was likely to leave it unable to pay its future debts, it would be committing a breach of contract. The courts would be able to grant injunctions to restrain dissipation of assets on a different basis from the present basis on which freezing injunctions can be granted. At one point, the Claimants invoked the principle adopted in Stirling v Maitland (1864) 5 B & S 840 at 852 in support of its argument that WCL should not do anything of its own motion which would put an end to circumstances which would enable it to perform its express contractual obligations. However, that principle has not been applied in the ordinary case of a contract to pay a sum of money to impose on the potential debtor an obligation to retain its assets to enable to pay the debt when it falls due. So far as the obligation to pay the Standard Sale Price and the Basic Profit is concerned, Ross River’s protection is that Ross River is only obliged to transfer the Shell Site to WCL if WCL pays those sums to Ross River. The position is no different from any other contract for the sale and purchase of property for a monetary price. So far as the obligation to pay the Development Profit is concerned, clause 12.3.5 of the JVA allowed Ross River (at the time of completion of the Shell Site) to require security for the future payment of Development Profit. Further, it is not clear how Ross River would be better off if, in addition to a claim in debt for the unpaid Development Profit, it also had a claim for damages because WCL had parted with its assets and had become unable to pay that debt. In my judgment, these considerations alone lead me to conclude that it is not appropriate to imply into the JVA a term which would prevent WCL taking action which would prejudice its ability to pay its debts (including the Development Profit) to Ross River. In addition to these considerations, I also recall that the express term in clause 10.5 of the JVA goes a long way to protect Ross River from WCL using for its own purposes monies from the development unless at the same time WCL makes a payment to Ross River on account of the Development Profit. Accordingly, I conclude that the court ought not to imply a term in accordance with the original formulation to the suggested second term.
226.	Finally, in relation to implied terms concerning WCL, I need to consider the amended version of the suggested second term. The amendment removed references to the Standard Sale Price and the Basic Profit. In so far as the amended term refers to Development Profit, the position remains as before. It is relevant that the JVA includes clause 12.3.5 and clause 10.5. Particularly in the light of those express terms, I do not see how the JVA could be said to have a meaning in accordance with the amended second term. Such an obligation is not obvious and is not necessary to give business efficacy to the JVA. The amended version of the second term has been extended so as to refer to “any other sums” which might become payable by WCL to Ross River. This wording has obviously been included to deal with the fact that some time after the entry into the JVA the parties entered into the side agreement under which further sums might be due to Ross River out of the Net Profits. However, the issue as to whether a term is to be implied into the JVA is to be made by judging matters as they appeared at the date of entry into the JVA. The later agreement, pursuant to the side agreement, was not envisaged when the parties entered into the JVA and even if there were any basis for contending for an implied term with reference to the Development Profit payable under the JVA, I can see no basis for extending any implied term so that it dealt with further sums which were not then in the contemplation of the parties.
227.	Accordingly, in relation to the suggested implied terms which would impose obligations on WCL, I conclude that I ought not to imply any of the suggested terms.
228.	I now turn to consider the suggested implied terms in relation to Mr Barnett and Mr Harney. As I pointed out when I discussed the implied terms in relation to WCL, it is difficult to see what a claim in damages for breach of the suggested implied term would add to a claim in debt against WCL. The position is different in relation to Mr Barnett and Mr Harney because Ross River accepts that it does not have a claim in debt against them. Therefore a claim against them in damages for breach of the suggested implied terms would for the first time make them liable for payment to Ross River if WCL did not pay its debts to Ross River. Indeed, it is clear that the Claimants’ case about implied terms is put forward principally to impose a personal liability on Mr Barnett and Mr Harney.
229.	The liability of Mr Barnett and Mr Harney pursuant to the suggested implied terms would be an extensive one. It would come very close to Mr Barnett and Mr Harney guaranteeing the payment to Ross River of the debts due from WCL to Ross River, in particular the debt represented by the Development Profit and the sums due out of Net Profits pursuant to the side agreement. In my judgment, it is clear that Mr Barnett’s and Mr Harney’s involvement in the JVA was to give the specific and limited commitments in clauses 11.4 and 11.5. It seems to me that the implication of the suggested terms would impose radically different and far reaching obligations on Mr Barnett and Mr Harney. Quite apart from the other considerations I have already referred to when considering the case of WCL and the suggested implied terms, it seems to me to be quite impossible for the court to construe the JVA so as to hold that Mr Barnett and Mr Harney had taken on the obligations which the Claimants are imposed by the suggested implied terms. Those obligations are not imposed by the JVA if one construes it to ascertain its true meaning. It is not obvious that Mr Barnett and Mr Harney were agreeing to take on such obligations; indeed, it is obvious that they were not taking on such obligations. Imposing such obligations on them is not necessary to give business efficacy to the JVA.
230.	Accordingly, I reject the Claimants’ contentions that any of the suggested terms are to be implied into the JVA.
The alleged fiduciary obligations
231.	Ross River has pleaded that WCL and Mr Barnett and Mr Harney owed fiduciary duties to Ross River. It was pleaded that the JVA gave rise to a relationship of trust and confidence between “the parties thereto”; Ross River has contended that Mr Barnett and Mr Harney were parties to the JVA in addition to WCL. It was then pleaded that WCL, Mr Barnett and Mr Harney owed specific fiduciary duties which included, relevantly, a duty to act in good faith and a duty not to place themselves in a position of conflict between their duties to Ross River and their own interests (or other conflicting duties) and a duty not to profit from their positions as fiduciaries. Earlier in the pleading, Ross River had pleaded various “financial irregularities”. The first of these was the obtaining of loans totalling £2.73m charged against the Development Property. At the trial, this allegation focused on the second of two loans rather than the first. The second loan was for £600,000 although the amount borrowed pursuant to this second loan was later increased to £775,000. The second financial irregularity was pleaded as the withdrawal of £240,000 as “management fees” when only £120,000 was agreed in that respect. The third financial irregularity was that there were “over 200 transactions”, i.e. payments, between WCL and connected parties. It was then pleaded that the effect of these financial irregularities was that the ability of WCL to pay Ross River the sum to which it would become entitled at the end of the joint venture was prejudiced. It was then pleaded that WCL and Mr Barnett and Mr Harney were in breach of their fiduciary duties owed to Ross River. In summary, the alleged breaches included the obtaining of loans and the payments made to connected parties (all of which prejudiced WCL’s ability to pay Ross River the Development Profit which would ultimately be due to Ross River). It was said that in relation to those matters, the alleged fiduciaries had not acted in good faith and had placed themselves in a position of conflict with their duties to Ross River and profited from their positions as fiduciaries. 
232.	At the trial, Ross River put forward its claim as to breach of fiduciary duty in the following way. It was robustly submitted that it was “absolutely obvious” that WCL and Mr Barnett and Mr Harney owed fiduciary obligations to Ross River. It was said that to allow Mr Barnett and Mr Harney to take monies from WCL and to produce the result that WCL had no funds to pay Ross River would be “an affront to justice”. In closing submissions, following requests from the court, counsel for Ross River did identify some authorities which they said enabled the court to find that WCL and Mr Barnett and Mr Harney owed fiduciary obligations to Ross River. As to what amounted to a breach of any such obligations, Ross River relied upon an analysis of transactions prepared by its forensic accountant. This analysis referred to in excess of 200 transactions under which money left WCL in favour of, principally, connected parties. It was said that none of those payments was for joint venture purposes. Ross River submitted that every single one of those occasions when a payment was made by WCL was an occasion of bad faith on the part of WCL and Mr Barnett and Mr Harney. In support of its claim that Mr Barnett, in addition to or in the alternative to being liable as a principal, was liable as an accessory who had dishonestly assisted WCL to break its fiduciary obligation, it was submitted that Mr Barnett had been guilty of dishonesty in relation to every single payment of this kind. In this way, it was submitted that as early as April 2005, when WCL made a payment of £1,350 plus VAT to Waveley Project Management Ltd, Mr Harney’s company, for the use of office premises provided by that company, that was an act of dishonesty on the part of Mr Barnett. Ross River’s repeated refrain was that Mr Barnett and Mr Harney had “stolen the JV assets” and that there could hardly be a plainer case of dishonesty. Although Ross River’s pleading had only referred to the financial irregularities prejudicing WCL’s ability to pay Development Profit and did not in terms refer to WCL’s ability to pay the sums due to Ross River under the side agreement, Ross River’s case at trial was that the fiduciary obligations extended to protecting Ross River’s right to be paid under the side agreement as well as paid the Development Profit. In the course of argument, I asked counsel for Ross River if a more realistic way of putting a case against WCL and Mr Barnett (Mr Harney not being an active Defendant for present purposes) was to say that, assuming they were fiduciaries, they were acting in bad faith not on every single occasion when WCL made a payment to a connected party but only when they realised that by making a payment to a third party they were jeopardising the ability of WCL to pay to Ross River what was ultimately due to Ross River. Counsel for Ross River did not at any time accept that was the correct approach although, as will be seen, I was provided with some material which might bear on that possible way of putting the case.
233.	Counsel for WCL and Mr Barnett rejected the suggestion that they owed any fiduciary obligations to Ross River. It was said that Ross River had bargained for, and had obtained, the benefit of the contract it had made with WCL. Mr Barnett was not a contracting party save in one or two respects which were not now material. When a sum became due to Ross River under the JVA, then Ross River would be an unsecured creditor of WCL. If WCL did not have the funds to pay Ross River, and if others (such as Mr Barnett) did not choose to fund WCL to make any necessary payment to Ross River, then Ross River would go unpaid. If Ross River had wanted additional rights against WCL or Mr Barnett, there were recognised ways of giving Ross River such rights but they had not been sought and had not been obtained. There was no proper basis on which the court could impose fiduciary obligations on WCL in addition to its contractual obligations. The position was even clearer in relation to Mr Barnett. He was a shadow director of WCL. He may have owed obligations to WCL but he did not take on any relevant obligations to Ross River. If he had been a director of WCL with clear fiduciary obligations to WCL, then it would be wrong for the court to impose on him other fiduciary obligations to Ross River. Those other obligations might conflict with his obligations to WCL. It required wholly exceptional facts before a court would impose on a director of a company a fiduciary obligation owed to a third party with whom the company was dealing.
234.	Faced with these radically opposed submissions as to the law and as to the facts, it seems to me that I need to consider, first, the legal principles which I am to apply and, secondly, the findings of fact which I should make and then reach what conclusions I can on the evidence presented to me on this question of breach of fiduciary obligations.
Fiduciary obligations: the law
235.	Chapter 7 of Snell’s Equity, 32nd ed., (2010) contains a useful summary of some at least of the relevant principles. I take the following propositions from that summary. A fiduciary is someone who owes fiduciary duties, and a fiduciary relationship is one between two or more persons in which one, the fiduciary, owes fiduciary duties to the other, or others. There are certain settled categories of fiduciary relationship. These include trustee and beneficiary, agent and principal, solicitor and client, promoter and company, partners, director and company (and see, now, sections 171 to 177 of the Companies Act 2006 for the duties of a director). The categories of fiduciary relationship are not closed. There may be such a relationship where all the circumstances justify a finding that fiduciary obligations are owed. Identifying the kind of circumstances that produce that result is difficult. The decisions of the courts have sought to retain flexibility as to the approach to be adopted. Numerous academic commentators have offered suggestions but none has gathered universal support. There is said to be growing judicial support for the following two propositions:
(1)	a fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence;
(2)	the concept encaptures a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is adverse to the interests of the principal.
236.	Snell continues by stating that a person may be in a fiduciary position in relation to part of his activities but not in relation to another part. It is possible for fiduciary obligations to arise in a commercial relationship. An obvious example is a commercial agency. Fiduciary relationships do not commonly arise in a commercial setting outside the settled categories of fiduciary relationship. This is because it is normally inappropriate to expect a commercial party to subordinate its own interests to those of another commercial party. But if that expectation is not inappropriate in the circumstances of the relationship, then fiduciary duties will arise.
237.	Snell then states that joint venturers have been held to owe fiduciary duties to one another but not all joint ventures necessarily involve such duties. While it has been suggested that joint ventures are inherently fiduciary because of their similarity to partnership, the term “joint venture” is a business term which does not have a precise legal meaning. It is unwise for such an ill-defined term to be the trigger for a category of fiduciary relationship. It is preferable for joint ventures not to be treated as a settled category of fiduciary relationship but an individual joint venture may appropriately be treated as a fiduciary relationship if, after a meticulous examination of its own facts, the fiduciary expectation is found to be appropriate bearing in mind the points made above about the appropriateness of that expectation between commercial parties.
238.	To say that a person is a fiduciary is to lead to a further analysis: what obligations are owed as a fiduciary? Speaking generally, the distinguishing obligation of a fiduciary is the obligation of loyalty. This obligation has several facets. In particular, a fiduciary must act in good faith, must not make a profit out of his trust and he must not place himself in a position where his duty and interest conflict.
239.	In White v Jones [1995] 2 AC 207 at 271, Lord Browne-Wilkinson said:
“The paradigm of the circumstances in which equity will find a fiduciary relationship is where one party, A, has assumed to act in relation to the property or affairs of another, B. A, having assumed responsibility, pro tanto, for B’s affairs, is taken to have assumed certain duties in relation to the conduct of those affairs, including normally a duty of care. Thus, a trustee assumes responsibility for the management of the property of the beneficiary, a company director for the affairs of the company and an agent for those of his principal. By so assuming to act in B’s affairs, A comes under fiduciary duties to B.”
240.	In Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206, Lord Browne-Wilkinson said:
“… the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. … The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise.”
241.	In F&C Alternative Investments (Holdings) Ltd v Barthelemy [2011] EWHC 1731 (Ch), Sales J had to consider a number of questions as to the existence of fiduciary relationships and the content of fiduciary obligations. When considering whether members of a limited liability partnership (LLP) owed fiduciary duties to each other he applied the passage I have quoted above from White v Jones: see at [212]. When considering whether the members of the LLP owed fiduciary duties to the LLP, he considered what significance to give to the fact that the LLP was said to be a joint venture between the members. He said, in that context (at [218]):
“[Counsel] submitted that the LLP was a joint venture between the Members, and that for that reason the law would impose fiduciary obligations owed both by them to the LLP and between themselves. However, the phrase “joint venture” is not in my view a precise term of art which in itself has any particular significance for an analysis of the existence and content of fiduciary obligations. Rather, it is necessary to look at the specific roles and responsibilities arising in the particular context in question in order to assess whether and what fiduciary obligations might arise.”
242.	Sales J then separately considered the position of others, for example, the members of the LLP board and the content of the fiduciary duties which they owed to the LLP. At [223] he said
“Fiduciary obligations may arise in a wide range of business relationships, where a substantial degree of control over the property or affairs of one person is given to another person. Very often, of course, a contract may lie at the heart of such a business relationship, and then a question arises about the way in which fiduciary obligations may be imposed alongside the obligations spelled out in the contract. In making their contract, the parties will have bargained for a distribution of risk and for the main standards of conduct to be applied between them. In commercial contexts care has to be taken in identifying any fiduciary obligations which may arise that the court does not distort the bargain made by the parties: see the observation of Lord Neuberger of Abbotsbury writing extra-judicially in “The Stuffing of Minerva’s Owl? Taxonomy and Taxidermy in Equity” [2009] CLJ 537, 543 and Vercoe v Rutland Fund Management Ltd [2010] EWHC 424 (Ch), [351] – [352]. The touchstone is to ask what obligations of a fiduciary character may reasonably be expected to apply in the particular context, where the contract between the parties will usually provide the major part of the contextual framework in which that question arises.”
243.	At [225], Sales J added:
“As Lord Walker of Gestingthorpe put it in Hilton v Barker Booth & Eastwood [2005] 1 WLR 567, at [30], obligations of a fiduciary type "may have to be moulded and informed by the terms of the contractual relationship" (and see Hawkes v Cuddy [2009] 2 BCLC 427 at [44]). There are similarities between the reasoning by which terms may be implied into a contract and the way in which fiduciary obligations may be found to arise in a contractual context, and it may be that with the new, unified approach to the question of implication of contract terms set out in AG of Belize v Belize Telecom Ltd [2009] 1 WLR 1988  the law is moving towards some assimilation of the relevant tests (see the discussion in J. Edelman, "When Do Fiduciary Duties Arise?" (2010) 126 LQR 302), albeit the two processes have traditionally been conceptualised as different. Fiduciary duties are obligations imposed by law as a reaction to particular circumstances of responsibility assumed by one person in respect of the conduct of the affairs of another. As between the parties to a contract, the existence of express or implied contractual terms may be directly inconsistent with the imposition of such duties, and hence exclude them; and that may also be true where a person who is not a party to the relevant contract (as, here, the F&C representatives on the LLP Board were not parties to the Agreement) accepts appointment to carry out functions defined by the contract and on the basis of the terms set out in the contract. It may also be the case that the overall contextual framework created by the contract simply means that it is not appropriate for the law to impose the whole range of possible fiduciary duties or fiduciary duties of particular types in that specific context - in other words, it may be found that the parties could not reasonably expect that some particular duty of a fiduciary character should apply in the context of their particular relationship or in the context of their relationship with a person accepting appointment as a manager or board member.”
244.	The article by J. Edelman in (2010) 126 LQR 302, to which Sales J referred, argues that the concept of a voluntary undertaking of an obligation is a necessary condition for any fiduciary duty; duties which are most commonly recognised as fiduciary are expressed or implied duties in relationships arising by voluntary undertakings to another; see, in particular, at 317 – 318 and 326.
245.	The Claimants referred me to Snell and to F&C Alternative Investments (Holdings) Ltd v Barthelemy. They also referred to John v James [1991] FSR 397 and Murad v Al Saraj [2004] EWHC 1235 (Ch).
246.	In John v James, Elton John claimed that DJM, his manager and publisher, to whom copyrights in songs had been assigned, had broken fiduciary obligations owed to Elton John, by exploiting the copyrights in a particular way. In addition to being under a duty to exploit the copyrights only in a way which DJM honestly considered to be for the joint benefit of Elton John and DJM, DJM was under a duty not to make for itself any profit not brought into account in computing the royalties payable to Elton John. At 433, Nicholls J said that this was the natural and obvious consequence of the arrangements made for the exploitation of the copyrights. The copyrights were assigned to the publisher with the intention that they would be exploited by the publisher, which would have complete control over the method of exploitation, not for its benefit alone but for the joint benefit. Commercially, the arrangement was in the nature of a joint venture and Elton John would need to place trust and confidence in the publisher over the manner in which it discharged its exploitation function.
247.	In Murad v Al Saraj, the claimants successfully argued that the defendant owed them fiduciary duties in connection with a joint venture to acquire a hotel. The fiduciary duties were held to arise because the parties were in the position of joint venturers, the relationship was one of trust and confidence, the defendant had taken on a number of responsibilities in connection with the joint venture, in some respects acting as the claimants’ agent, the claimants had no relevant experience, they had no knowledge of the arrangements made by the defendant with third parties and they entrusted the defendant with extensive discretion to act in relation to venture which affected the claimants’ interests. The judge ordered that the defendant should account for the entirety of his profits from the joint venture even though that remedy gave to the claimants significantly more that they would have obtained pursuant to an award for damages for deceit, to which they were also entitled. The defendant appealed to the Court of Appeal against the award of an account of profits but did not appeal against the finding of a breach of fiduciary duty. The appeal was dismissed: see [2005] EWCA Civ 959. 
248.	Following the conclusion of the argument in this case, the Court of Appeal decided Crossco No. 4 Unlimited v Jolan Ltd [2011] EWCA Civ 1619 where Etherton LJ referred (at [88]) to the decision in Murad v Al Saraj in this way:
“In the absence of agency or partnership, it would require particular and special features for such fiduciary duties to arise between commercial co-venturers. It is clear, however, that in special circumstances they can arise: Snell’s Equity (32nd ed) at 7-006; Murad v Al-Saraj [2004] EWHC 1235 (Ch) at [325]-[341], [2005] EWCA Civ 959.”
249.	The Defendants referred me to three authorities in relation to the fiduciary duties alleged in this case. The cases were Ratiu v Conway [2006] 1 EGLR 125, Diamantides v JP Morgan Chase Bank [2005] EWCA Civ 1612 and J D Wetherspoon plc v Van de Berg & Co Ltd [2007] EWHC 104 (Ch). These three cases principally concerned the identity of the persons by whom and to whom fiduciary obligations were owed.
250.	Ratiu v Conway involved a claim for damages for defamation. The claimant was a solicitor. The defendant had published a letter which was defamatory of the claimant. The defendant pleaded justification. An issue arose as to the fiduciary obligations owed by the solicitor. It was admitted that the solicitor owed fiduciary obligations to his client (a company called Pristbrook). The issue was whether the solicitor owed fiduciary obligations to Pristbrook’s parent, Regent. The trial judge had directed the jury that the solicitor did not owe fiduciary obligations to Regent. The Court of Appeal disagreed. Auld LJ said at [77] that the answer to the issue was highly fact sensitive. At [78] he added: 
“There is, it seems to me, a powerful argument of principle in this intensely personal context of considerations of trust, confidence and loyalty, for lifting the corporate veil where the facts require it to include those in or behind the company who are in reality the persons whose trust in and reliance upon the fiduciary may be confounded.”
Auld LJ then referred to two earlier cases where a duty of care was held to be owed by a solicitor, not only to the solicitor’s corporate client but also to a director of that client: see R P Howard Ltd v Woodman Matthews & Co [1983] BCLC 117 and the decision of the Court of Appeal in Johnson v Gore Wood [1999] BCC 474. At [81], Auld LJ said that in the context of a claim in defamation there might well be a greater imperative for allowing reality to prevail over technical aspects of corporate law. At [186], Laws LJ agreed with what Auld LJ had said at [78]. At [188], Sedley LJ stated that a willingness to lift the corporate veil accorded with common sense and justice when the issue is as to whom a solicitor owes his professional duties.
251.	In Diamantides v JP Morgan Chase Bank, the claimant alleged that the defendant bank owed the relevant fiduciary duties to him alone. The Court of Appeal struck out that claim holding that on the facts pleaded it was unsustainable. The court considered the earlier decision in Ratiu v Conway. Moore-Bick LJ said at [35] that the judgment of Auld LJ emphasised that because a fiduciary relationship did not depend on the existence of contractual relations, there may be circumstances in which a duty of that kind might arise not only between the fiduciary and the client but also between the fiduciary and a third person who is closely connected with the client.
252.	Both of these cases concerned the identity of the person to whom an admitted fiduciary owed fiduciary obligations. In J D Wetherspoon plc v Van de Berg & Co Ltd, the issue was as to the identity of the persons who owed fiduciary obligations. In the case of a corporate agent who owed fiduciary obligations to its principal, did the directors of that agent also owe fiduciary obligations to the principal? There were three such directors. Two of the three applied to strike out the claim based on an alleged fiduciary duty owed by them. Lewison J refused to strike out the claim. He referred to the earlier decision in Satnam Investments Ltd v Dunlop Heywood Ltd, Chadwick J (unreported) and Court of Appeal, [1999] 3 All ER 653, where the trial judge in that case referred to the course of dealing between the claimant and the defendant company acting as its surveyors and consultants; he held that a director of the defendant company also “plainly” owed fiduciary duties to the claimant. Lewison J held that in view of the similarity in the facts alleged in the case before him and the Satnam case, it was arguable that the directors of the corporate defendant owed fiduciary duties to the claimant. He added that on the facts there was an allegation that one director had been retained as the claimant’s agent before the corporate defendant had been formed. Lewison J also referred to the possibility of lifting the veil of incorporation as described in Raitu and Diamantides.
253.	Although the parties did not refer me to it, I have also considered the judgment of Peter Smith J given after the trial in J D Wetherspoon plc v Van de Berg & Co Ltd: see [2009] EWHC 639 (Ch). The trial judge distinguished between the position of the three directors, referred to as CB, RH and GA. He held at [77] that there was a relationship of trust and confidence between the claimant and CB personally. The corporate defendant was CB’s vehicle for the purpose of discharging the duties he had to the claimant. Accordingly, CB was held to owe fiduciary duties to the claimant. On the facts, it was held that RH and GA did not the same relationship with the claimant and did not owe fiduciary duties to it. As was later explained, it was open to the claimants to allege that RH and GA had dishonestly assisted the breaches of fiduciary duty by others and, indeed, in relation to some of the matters alleged, RH and GA were held liable on this basis as accessories: see at [554] and [590]. This decision is therefore, at one and the same time, an illustration of a set of facts where a director of the corporate fiduciary owed similar duties to the claimant and a case where two directors of the corporate fiduciary did not owe such duties.
254.	I have also considered the decision of the House of Lords in Williams v Natural Life Ltd [1998] 1 WLR 830. That case concerned an alleged duty of care said to be owed by the director of a company to the company’s client. The alleged duty was said to arise by reason of a voluntary assumption of responsibility for advice in accordance with the principles identified in Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465 and Henderson v Merrett Syndicates Ltd [1995] 2 AC 145. Although the Williams case concerned an alleged duty of care and not a fiduciary duty, it is nonetheless potentially relevant because, as my earlier citations from Snell’s Equity and the decided cases show, the court will recognise the existence of fiduciary duties where it holds that a person has, expressly or impliedly, assumed such duties. In Williams, it was held that in order to establish personal liability in tort on the part of the director, it was not sufficient that there should have been a special relationship between the client and the company; there must have been an assumption of responsibility such as to create a special relationship with the director himself: see at 835C. The inquiry must be whether the director, or anyone on his behalf, conveyed directly or indirectly to the client that the director assumed personal responsibility to the client: see at 835H. I should add that neither side referred me to this case and I did not have the benefit of their submissions on it.
255.	Finally, in relation to the legal principles as to the existence of fiduciary duties, I will refer to the decision of Briggs J in Ross River Ltd v Cambridge City Council [2008] 1 All ER 1004, although that case also was not cited to me. The claimants in that case were the same as the Claimants before me. In that case, the allegation was that Ross River was in breach of certain fiduciary obligations upon it. In the case before me, Ross River has alleged that the other side was in breach of fiduciary obligations. Briggs J had to consider the existence of fiduciary obligations in a case of a joint enterprise or joint venture. He said at [197] – [199]:
“[197] In relationships falling short of partnership, but having in them elements of joint enterprise or joint venture, there is no hard and fast rule as to the existence or otherwise either of a duty of good faith, a fiduciary duty or a duty of disclosure. Each case will turn on its own facts, but if the relationship is regulated by a contract, then the terms of that contract will be of primary importance, and wider duties will not lightly be implied, in particular in commercial contracts negotiated at arms' length between parties with comparable bargaining power, and all the more so where the contract in question sets out in detail the extent, for example, of a party's disclosure obligations: see more generally Hospital Products Ltd v United States Surgical Corp (1984) 55 ALR 417 at 454–455, (1984) 156 CLR 41 at 97, where Mason J said this:
'That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.'
[198] There are however well-known badges or hallmarks of a fiduciary relationship, such as:
'whenever the plaintiff entrusts to the defendant a job to be performed, for instance, the negotiation of a contract on his behalf or for his benefit, and relies on the defendant to procure for the plaintiff the best terms available . . .' (See per Asquith LJ in Re Reading's Petition of Right [1949] 2 All ER 68 at 70, sub nom Reading v R [1949] 2 KB 232 at 236.)
[199] I was invited by [counsel] for the claimants to take note of the following passage in Paul Finn's essay 'Fiduciary Law in the Modern Commercial World' collected in McKendrick on Commercial aspects of fiduciary obligation (1992):
'An appraisal (i) of the manner in which, and the apparent purpose for which rights, powers, duties and discretions are allocated by the contract; (ii) of the contract's particular commercial or business setting, and (iii): of the self-serving actions lawfully open to a party both under, and not withstanding the contract will, as a rule, indicate decisively whether the role and reason of a party in the contract (or in a discrete part of it) can properly be said to be to serve his own interests, the parties' joint interests, or the interests of the other party.'
I shall adopt that guidance, in analysing the relationship created by the sale agreements.”
Fiduciary obligations: discussion
256.	The first topic I need to consider is whether, on the specific facts of this case WCL owed fiduciary obligations to Ross River. In accordance with the legal principles which I have referred to above, the underlying question is whether on the specific facts of this case, WCL undertook expressly or by implication a fiduciary obligation to Ross River. In my judgment, the particular fiduciary obligation which I will consider separately and in the first instance is whether WCL undertook an obligation to act in good faith in relation to its conduct of the joint venture and the payment of monies to Ross River.
257.	Under the JVA, as between Ross River and WCL, the latter had complete control over the operation of the joint venture, at any rate in the later stages following the sale of the supermarket site (which occurred in March 2006). Thus, WCL was to handle the disposals of the interests in the site. WCL was to receive the proceeds of those disposals. WCL was to incur the expenditure necessary for the purposes of the joint venture and it was to pay the sums due in those respects. WCL was to account to Ross River in relation to the Net Profits and to pay to Ross River the Development Profit. Some of the terms of the JVA are of particular relevance in this regard. The agreement was expressed to be “a joint venture”. The objectives of the parties were to maximise profits from the development. The parties were to share in the profits from the development at the earliest possible time. WCL was to provide Ross River with all relevant invoices and accounts. Under clause 10.5, Ross River was entitled to receive Development Profit. Development Profit was to be arrived at by deducting relevant expenses from relevant revenues. Clause 10.5 appeared to contemplate that WCL was not entitled to pay itself out of the revenues of the development before it accounted to Ross River for its share of Net Profit. Ross River had no control over most if not all of these matters. Ross River had no nominee director on the board of WCL and had no shares in WCL. Mr Barnett accepted when cross-examined that Ross River “reposed a very high degree of trust in [him] and Mr Harney to run the JV for the benefit of all parties” and that “with that trust came duties which [he] owed, [he] and WCL owed,  ... to the Ross River parties”. That answer by Mr Barnett partly concerns matters of fact and partly deals with the legal consequences of those facts. Mr Barnett accepted as a fact that Ross River placed a very high degree of trust in him and Mr Harney. He also accepted, seemingly as a legal consequence of that fact, that he and WCL owed duties to Ross River. I am not obliged to find as a matter of law that WCL (and Mr Barnett) did owe a fiduciary obligation of some sort to Ross River just because of that answer. The issue is ultimately one of law and not one of fact. However, the issue of law is very sensitive to the particular facts of the case. If I felt that Mr Barnett had been pressurised into giving this answer, I would pay little attention to it on its own. However, apart from the inevitable pressure of the process of cross-examination, Mr Barnett gave this evidence readily and freely. He did not make any attempt to quarrel with, or even qualify, the proposition that was put to him. I am able to make a finding supported by this evidence that Ross River did have to trust WCL and Mr Barnett as to the operation of the joint venture and as to the necessary accounting process at the end of it. Indeed, that finding is supported by all the evidence in the case. I am also entitled to bear in mind that Mr Barnett freely accepted that he and WCL owed duties to Ross River as a result of the fact that Ross River placed trust and confidence in them. Ross River also relied upon an email of 15th December 2004 between the solicitors for the parties at the time of the negotiation of what became the JVA. The email referred to the need for “a high measure of trust and understanding between the parties to reach agreement in relation to outstanding matters”. I do not place much weight on this email. It appears to be dealing with the process of negotiation of the JVA agreement itself rather than with the operation of the concluded JVA. However, the email does not in any way detract from the finding I make as to the trust and confidence which necessarily Ross River had to have in WCL (I will consider the position of Mr Barnett separately in a moment).
258.	In my judgment, on the specific facts of this case, it is right for the court to hold that WCL did impliedly undertake an obligation to act in good faith in relation to the operation of the joint venture and in relation to the accounting to Ross River in respect of its share of Net Profits. I discussed earlier in this judgment whether the express provisions of clause 10.5 of the JVA might undermine Ross River’s case for implied terms in the JVA. I considered that if the matter, which Ross River submitted should be covered by an implied term, was already dealt with by an express term, that would indeed undermine the case that there should be an implied term in addition to the express term. Although the court’s search for the existence of a fiduciary obligation involves the court asking whether a party expressly or impliedly undertook the fiduciary obligation and although Sales J in F&C Alternative Investments at [225] persuasively suggested that there were similarities as to the legal principles relating to the implication of terms and the legal principles as to when the court should recognise the existence of a fiduciary obligation, I do not regard the existence of clause 10.5 in the JVA as undermining my conclusion of a fiduciary obligation of good faith in this case, but rather as supporting that conclusion. Clause 10.5 supports the conclusion because the existence of the fiduciary obligation is entirely consistent with the express term and is not contradicted by it.
259.	Ross River contends for further fiduciary obligations on the part of WCL. It is said that WCL owed a duty not to allow a conflict between its own interests and its duty to Ross River. It is further said that WCL was not to profit from its position as a fiduciary under the JVA. More specifically, the way in which Ross River alleges that WCL allowed a situation of conflict, or profit for itself, to arise was due to the fact that WCL paid monies to connected parties before it paid Ross River its share of Net Profit. Of course, where there is a fiduciary relationship, it will often be right to hold that the fiduciary will be subject to obligations to avoid conflict and not to profit. That applies in the classic cases of fiduciary relationships for example in the case of company directors. However, the present case is not a classic case of a fiduciary relationship. Instead it is a case where the court has to consider whether it is appropriate to recognise the existence of certain fiduciary duties in the special circumstances of this case. My difficulty with the suggestion that WCL owed fiduciary obligations, in addition to the obligation to act in good faith, is that the JVA created a commercial relationship between WCL and Ross River from which WCL was to profit in its own interests. As against that, there is clause 10.5 of the JVA. On my reading of that difficult provision, WCL was not to “pay itself” before it paid Ross River its appropriate share of Net Profits. I have already stated that the existence of that clause tends to strengthen the case of the fiduciary obligation of good faith. For some reason, Ross River has not pleaded its ability to rely upon what I consider were its contractual rights under clause 10.5 and had not claimed damages or other relief by reason of WCL’s breach of clause 10.5. I have considerable hesitation therefore in supplementing this deficiency and in holding that Ross River can claim relief because WCL paid itself its share before it paid Ross River’s share by asserting a fiduciary obligation not to allow a conflict of duty and interest and not to profit from a fiduciary position. However, notwithstanding this hesitation, on balance I consider that it is appropriate to hold that WCL did owe to Ross River a fiduciary obligation not to do anything in relation to the handling of the joint venture revenues which favoured itself to the disadvantage of Ross River. Beyond that, I do not think I can go in determining the existence of a fiduciary obligation not to allow a conflict between duty and interest and not to profit from the fiduciary position. 
260.	The fiduciary obligations on the part of WCL, as described above, existed from the entry into the JVA on 23rd December 2004. At that point, Ross River was to be entitled to one-third of the Net Profits. Accordingly, the fiduciary obligations on WCL were to act in good faith in relation to Ross River’s entitlement to receive that share and not to do anything in relation to the handling of the joint venture revenues which favoured itself to the disadvantage of Ross River’s entitlement to receive that share. I next need to consider the effect, if any, of the parties entering into the Side agreement on 15th August 2005. As explained, the Side agreement resulted in WCL coming under a considerably greater liability to pay monies to Ross River. WCL was to repay a loan of £325,000 and to pay a further sum by way of Prior Profit Allocation. Whether that term was completely accurate, it was undoubtedly the case that if Ross River elected to forego Basic Profit and to take Development Profit under the JVA, the payment of Prior Profit Allocation grossed up to £352,500 was to come out of the Net Profits of the development. In my judgment, in a case where WCL was under a pre-existing fiduciary obligation of the kind I have described in relation to Ross River’s share of Net Profits, it follows that when the parties entered into the Side agreement that fiduciary obligation also extended to Ross River’s entitlement to receive the Prior Profit Allocation out of Net Profits. That leads next to a consideration of the position in relation to the repayment of the loan of £325,000. There is quite a strong argument that this loan gave rise to a straightforward debtor and creditor relationship and that questions of fiduciary obligations did not arise. However, I consider that it is improbable that the parties would have considered that there was a distinction to be made, as regards WCL’s duties to Ross River, between the payment of £235,000 under the Side agreement and the payment of £352,500 under the same agreement. Both sums were due, from WCL to Ross River, under the same agreement. It must have been contemplated that the sum of £325,000 as well as the sum of £352,500 might have to be paid out of the Net Profits. Accordingly, I conclude that the fiduciary obligations of WCL extended to both of the sums payable to Ross River under the Side agreement as they did to the Development Profit payable under the JVA.
261.	I next need to consider the case that Mr Barnett personally owed fiduciary obligations to Ross River. Counsel for Ross River said that it was “absolutely obvious” that he did so. I do not regard the answer to this question as at all obvious. The cases stress that any question of recognising the existence of a fiduciary relationship outside the classic cases is very sensitive to the facts of the particular case. Further, normally it will not be right to hold that a director of a company which is dealing with a third party owes personal fiduciary obligations to that third party, even in a case where the company owes fiduciary obligations to the third party. The distinction which is normally to be made between the company and the director is a fundamental one in company law. Nonetheless, the cases show that it is possible in special circumstances to find that a director has taken on such a fiduciary obligation. Are the circumstances here special enough or are they no more than what is normally the case where a company deals with a third party?
262.	I will begin by considering a possible fiduciary obligation of good faith. In this case, Mr Barnett personally had been deeply involved with the intended development or a similar development for some years. He gave evidence that it was only his exceptional persistence and skill which enabled the development to take place. For several years before the JVA, Mr Barnett had operated through his wholly owned company, Bradcliffe. WCL was specifically formed as a clean company to enter into the JVA with Ross River. WCL was owned 80% by Mr Barnett. The other 20% was owned by Mr Harney who was a close business associate of Mr York, the man behind Ross River. During the negotiations for the joint venture, Mr Harney wrote (on behalf of himself and Mr Barnett) to Ross River and stated that “Peter Barnett and Paul Harney have been involved in this project for five years and have been and remain fully committed to achieving a successful outcome”. When Mr Barnett was cross-examined, he accepted that  Ross River “reposed a very high degree of trust in [him] and Mr Harney to run the JV for the benefit of all parties” and that “with that trust came duties which [he] owed, [he] and WCL owed,  ... to the Ross River parties”. Thus he freely accepted that he personally owed duties to Ross River, based on the trust and confidence which Ross River placed in him personally. Mr Barnett considered that he and Mr Harney should be paid personally for their efforts in managing the joint venture. It was eventually agreed between the parties in February 2006 that Mr Barnett and Mr Harney would be entitled to receive personally a management fee of a maximum of £120,000. I recognise that this fee was payable by WCL to Mr Barnett and Mr Harney but the payment directly affected Ross River’s position because the amount of the fee would be deducted from the revenues of the development when calculating Net Profits. It seems to me that this arrangement served to emphasise the personal contribution being made by Mr Barnett and Mr Harney in carrying out the joint venture. I also must bear in mind the approach of the Court of Appeal in Ratiu v Conway [2006] 1 EGLR 125 when considering the person to whom a fiduciary obligation is owed. Of course, I am considering the different question of by whom the obligation is owed but the decision is helpful and was considered to be helpful in the present context in J D Wetherspoon plc v Van de Berg & Co Ltd, both on the strike out application, [2007] EWHC 104 (Ch), and at the later trial, [2009] EWHC 639 (Ch). My conclusion is that Mr Barnett did owe a fiduciary obligation of good faith to Ross River from the entry into the JVA in December 2004.
263.	I will next consider whether Mr Barnett owed further fiduciary obligations to Ross River. In the case of WCL, I was prepared to hold that WCL did not owe to Ross River a general obligation not to allow duty and interest to conflict nor a duty not to profit from the fiduciary position but did owe a duty not to do anything in relation to the handling of the joint venture revenues which favoured itself to the disadvantage of Ross River. I have separately considered the position of Mr Barnett in this regard. Essentially for the same reasons as I gave in relation to WCL, I hold that Mr Barnett did owe to Ross River a fiduciary obligation not to do anything in relation to the handling of the joint venture revenues which favoured himself to the disadvantage of Ross River. I add that when considering whether any action “favoured himself” I will include the case where the party favoured by Mr Barnett’s actions was a company controlled by him or in which he had a substantial interest. As was the position with WCL, following the entry into the Side agreement, Mr Barnett’s fiduciary duties extended not only to protect Ross River’s rights to payment under the original JVA but also to payment of the sums due to Ross River under the Side agreement.
Any breach of fiduciary obligations?
264.	The fiduciary duties which I am considering are the duty of good faith and the duty not to do anything in relation to the handling of the joint venture revenues which favoured WCL or Mr Barnett to the disadvantage of Ross River. The duties have to be applied in a case where, at the outset of the joint venture, the parties to it had expectations as to the likely level of Net Profits which would allow them to assess what sum would ultimately turn out to be payable by WCL to Ross River and what sum would be retained by WCL. Before considering the detailed figures, it may be helpful to make a general point. If Net Profits were expected to be £1.5m and Ross River was entitled to one-third of Net Profits, then when the time came for Ross River to receive its share, WCL would be obliged to pay £0.5 m to Ross River and would be able to retain the balance of £1.0m. If at an earlier stage, before any sum was due to Ross River, WCL dipped into the revenues received during the course of the joint venture and paid a sum to a connected party, there could be a question as to whether such a payment to a connected party would be to the disadvantage of Ross River. In my judgment, there is no single right answer to such a question. A small payment to a connected party at an early stage and long before the time when WCL would receive substantial revenues from the joint venture might not carry any possible disadvantage for Ross River. Thus even though the payment benefited the connected party, it could not disadvantage Ross River and so would not be a breach of the second fiduciary obligation. I would also find it difficult to hold that WCL was acting in bad faith in making that payment in such circumstances. Conversely, a large payment or a series of substantial payments by WCL to a connected party at a time when WCL should consider whether it would end up with enough retained revenues to pay all its creditors and £0.5m to Ross River would be, or would be likely to be, to the disadvantage of Ross River. If WCL make such a payment or payments in those circumstances, it might well be right to conclude that it was acting in bad faith towards Ross River.
265.	Unfortunately, I received very little assistance in the course of the trial in answering the question I have posed as to whether WCL and/or Mr Barnett committed a breach of fiduciary duty. So far as Ross River was concerned, any payment at any point by WCL to anyone, connected or not, which was not for joint venture purposes was a breach of fiduciary duty. This submission was expressed in energetic language such as “Mr Barnett was stealing the JV assets”. I reminded counsel for Ross River on more than one occasion that the phrase “JV assets” might be appropriate if the assets nominally vested in WCL were held on trust for WCL and Ross River in the shares payable pursuant to the Joint Venture. If the assets had been held on trust in that way, then parting with them for unauthorised non-joint venture purposes would clearly be a breach of trust. Counsel for Ross River ultimately accepted that the assets were not held on trust in that way but that they were held legally and beneficially by WCL. Nonetheless, Ross River submitted that the first payment (and every later payment) which it said was not for joint venture purposes was made by WCL in bad faith and, for good measure, was a payment which Mr Barnett dishonestly caused to be made. The first payment was the sum of £1,350 plus VAT paid in April 2005 by WCL to Waveley Project Management Ltd and was allegedly due from WCL in relation to office facilities provided to WCL. There was no examination of the circumstances of that individual payment and what WCL’s or Mr Barnett’s thinking was in relation to it. Yet it was submitted that I should make a finding of bad faith and dishonesty if I were later to hold (as I have done) that that payment should not be brought into account as expenditure when calculating Net Profits. I regret to say that these unrealistic submissions on the subject of bad faith and dishonesty were of no help to me in answering the correct question which arises. In turn when Mr Barnett gave his evidence, he insisted, at least some of the time, that all of the assets and revenues of WCL were used exclusively for joint venture purposes. But this insistence was only during some of his evidence. On other occasions, he accepted that sums were paid away to connected persons for non-joint venture purposes. He also took up intermediate positions. 
266.	Because the parties (in particular, Ross River, who bore the burden in relation to establishing a breach of fiduciary duty) failed to ask the right question or to adduce evidence directed to answering that question, I have found the burden of providing my answer to that question to be much greater than it ought to have been. I consider that the best thing I can do is to attempt to describe the material which has been placed before me and then to consider what to do.
267.	It seems to me that an appropriate starting point is to identify what WCL ought reasonably to have considered from time to time would be the likely outcome of the development and the resulting sum payable to Ross River and the resulting sum which could be retained by WCL.
268.	In January and February 2006, WCL showed to Ross River certain appraisals which it had carried out. I will refer to two appraisals in particular. The first showed a figure for net profit of £1,546,555 and the second showed a net profit of £1,461,145. Both of these appraisals showed revenues of £3,750,000 from the sales of 5 shops and 17 flats. I note that Savills had in January 2006 prepared two appraisals in relation to the completed development; in one appraisal, Savills had used the figure of £3.75m for this element of the development and in another they had used the figure of £4.25m. As between WCL and Ross River, the appraisals used by WCL appeared to have adopted the more conservative figure. It is relevant to note what the WCL appraisals show as to the way in which net profit was to be generated. The appraisals show that the first stage was for the supermarket site to be sold to an investor. At the end of that stage, WCL would not show a profit but a comparison of the revenues and costs at that date showed a negative return of about £275,000 on the first appraisal and a negative return of about £400,000 on the second appraisal. The second stage in each appraisal showed the costs of that second stage followed by the receipts from sales of shops and flats which, in each appraisal, totalled £3.75m. The costs to be deducted from this revenue figure were about £2.2m in the first appraisal and about £2.3 m in the second appraisal. Hence the difference in the final figures of £1,546,555 and £1,461,145. The forensic accountant for Ross River summarised other development appraisals which showed net profit figures of £1,397,145, £1,789, 092 and £1,651,057.
269.	As regards the final calculation of Net Profits, the forensic accountant called on behalf of Ross River initially showed an expected net profit of £1,518,793. He later revised that to £1,558,787. The forensic accountant called on behalf of WCL initially calculated an expected net profit of £280,867; he later revised that to £480,628. In this judgment, I have made my findings on the items in dispute which will allow Net Profits, in accordance with the JVA, to be calculated. As explained, I am unable myself to determine the final figure for Net Profits as it has been agreed that, following my findings, the forensic accountants will determine what figures should be inserted for bank charges and interest and the final figure for Net Profits will then emerge. However, it is clear that the resulting figure will be somewhat less than the figure put forward by the forensic accountant for Ross River. Faced with this great range of figures, it seems to me that the most helpful thing for me to do is to take the round figure of £1.5m as the kind of figure which WCL should have had in its mind during the course of joint venture as the possible outcome by way of Net Profits. Of course, WCL would appreciate that any such figure was only a prediction of future profit and future events were not wholly predictable.
270.	Using the figure of £1.5m as predicted Net Profits, that figure would be divided between the parties in different ways during different periods of the history. From the JVA agreement (23rd December 2004) to the Side agreement (15th August 2005), Ross River could be expected to be entitled ultimately to £0.5m with WCL being entitled to retain £1.0m. From the Side agreement until the Third Supplemental Agreement (in or around May 2006), Ross River could be expected to be entitled to £352,500 + 1/3 (£1,500,000 - £352,500) + £325,000, that is, £352,500 + £382,500 + £325,000 = £1,060,000, with WCL being entitled to retain £440,000. It can be seen at once that the Side agreement transformed the position as to the parties’ shares of Net Profits. From the Third Supplemental Agreement onwards, Ross River could be expected to be entitled to £391,667 + 40% (£1,500,000 - £391,667) + £325,000, that is, £391,667 + £443,333 +  £325,000 = £1,160,000, with WCL being entitled to retain £340,000.
271.	The figures in the last paragraph are revealing. From around May 2006 onwards, WCL could expect to retain some £340,000 only out of the expected Net Profits. WCL and Mr Barnett would know that if WCL paid connected parties sums which were not for joint venture purposes in circumstances where it could not be confident that it would recover those monies from those parties and those monies exceeded £340,000 then it would have jeopardised its ability to pay the full sum which it could expect Ross River would be entitled to. Indeed, once WCL had paid to connected parties a sum of £1.5m or more in circumstances where it could not be confident that it would recover those monies from those parties then WCL would have jeopardised its ability to pay anything to Ross River.
272.	I now turn to consider the evidence as to the sums which WCL paid to connected parties otherwise than for joint venture purposes. I start with the report of the forensic accountant for Ross River. In paragraphs 9.35 to 9.54 of that report, the accountant identified what he said were 215 connected party payments. He described how he had asked WCL and its advisers for information as to what these payments related to. On 26th April 2011, WCL’s solicitors wrote that these transactions did not relate to the joint venture and had not been charged to the joint venture account. The accountant pressed WCL’s solicitors for confirmation that they meant what they said and the solicitors replied stating that they would only deal with “specific and proportionate” queries. In his report, the accountant itemised the 215 transactions and considered the positions between WCL on the one hand and all the connected parties taken individually, on the other. These connected parties were WDL, Waveley Ltd, Waveley Project Management Ltd, Bradcliffe, Mr Barnett and Mr Harney. The accountant then, in his report, showed what the cash position of WCL would have been if these 215 payments had not been made. One of the points made by the accountant was that if the cash position of WCL had been in accordance with his re-worked position then the interest charges borne by WCL would have been very different. 
273.	During the trial, Ross River’s accountant produced a revised statement running to 24 pages which showed the cash position of WCL from February 2005 to July 2011. The statement showed what the accountant said was the position as to payments made by WCL to connected parties and payments by connected parties to WCL. The statement then calculated the state of the account between WCL and connected parties. There was said to be a deficit on non joint venture matters adverse to WCL of the following sums at the end of the following years:
Year	Deficit in £	
2005	82,217	
2006	759,827	
2007	500,397	
2008	946,014	
2009	976,771	
2010	961,961	
274.	The deficit in July 2011 was said by Ross River’s accountant to be £1,031,781. However, Ross River accepted that a payment of £120,000 to Mr Barnett and Mr Harney for management fees was due and that reduced the deficit on payment to connected persons of non joint venture matters to £911, 781.
275.	As part of their closing submissions, counsel for Ross River produced a schedule referring to the state of the deficit at different points in time. The schedule chose figures indicating various possible sums that WCL might have been entitled to retain out of what emerged as the Net Profits. One of the figures chosen was £470,000 which was not correctly calculated. I have shown above my own calculation of what WCL might have thought it might be entitled to retain out of predicted Net Profits of £1.5m. The schedule has the further problem that it does not reflect the agreement that WCL could pay £120,000 management fees to Mr Barnett and Mr Harney. At any rate, the schedule shows that the deficit was over £470,000 by 19th October 2007 and never thereafter reduced below that figure. Further, the deficit was over £750,000 (and not later reduced) by 13th March 2008 and over £900,000 (and not later reduced) by 19th May 2010.
276.	Following the conclusion of the oral hearing, WCL submitted a detailed written response to some of these matters as to the deficit between WCL and connected parties. Although it had been agreed at the end of the trial that WCL could serve a written reply to a particular written submission made by Ross River late in the closing submissions, the documents served by WCL went far beyond anything which had been explained to me at the trial would be forthcoming. Many of the points made, if there was anything in them, could and should have been made much earlier in the trial. For example, WCL for the first time prepared a detailed commentary on the schedule which Ross River’s accountant had produced as part of his evidence at the trial. WCL sought to introduce new assertions of fact that had not been dealt with in their evidence at the trial or put during the cross-examination of Ross River’s witnesses. It was said that when WCL’s solicitors said in April 2011 that none of the 215 payments related to the joint venture, that was simply wrong and Ross River should have known that it was wrong. WCL stated that the alleged deficit made no allowance for legal costs borne by WCL in defending the present proceedings. In addition to its written commentary, WCL served a schedule running to 28 pages, which set out (most of it for the first time) a response to the schedule produced by Ross  River’s accountant as part of his evidence at the trial. WCL’s schedule makes a large number of points, some at least of them entirely new. WCL disagrees with the calculation of the deficit carried out by Ross River’s accountant. WCL says that WDL made four payments to WCL which have been missed by Ross River’s accountant. As I understand it, it is said that WDL lent the following sums to WCL: £5,000, £20,021, £4,000 and £1,737. It is said that the alleged deficit includes a large sum for office costs payable by WCL. It will be remembered that it was WCL’s case that it was entitled to a total of £85,910 for these costs. I have held that WCL was only entitled to an allowance of £20,000 for costs of that kind. Therefore, instead of whatever figure was paid by WCL as shown in its cash statements, one should substitute £20,000 as joint venture expenditure and not contributing to the deficit in favour of connected parties. So if the cash schedule does show that £85,910 was paid for alleged office costs and only £20,000 should be allowed for that sum then the payments which were not for joint venture purposes were £65,910. In addition, WCL’s schedule double counts in relation to this topic. The first thing it does is to re-calculate the alleged deficit by regarding a payment towards office costs as not contributing to the deficit. The second step is to make a separate claim for a credit against the deficit of £85,910. Thus, if the cash analysis shows that £85,910 was indeed paid by WCL for alleged office costs, then WCL’s schedule misstates the amount of the deficit by (2 X £85,910) - £20,000, i.e. £151,820. WCL’s new schedule claims that certain matters were expenses of the joint venture when, so far as I am aware, WCL did not lead evidence at the trial to support that contention. The burden of proving the facts needed to justify the deduction of an item of expenditure is on WCL. The time for WCL to lead the necessary evidence was at the trial not in a schedule prepared after the conclusion of the trial. WCL also claims a credit against the deficit for £240,000 in respect of management fees. WCL is entitled to a credit of £120,000 as accepted by Ross River, but no more. WCL’s schedule also states that some of the payments were in relation to legal fees incurred in defending this claim. I was not given a total for these fees as disclosed in the schedule but it seems to me that the relevant total exceeds £500,000. There is a dispute whether WCL was entitled to use its assets to pay these legal fees. I will refer to that matter further below. However, before considering that point, I observe that a substantial part of the payments in respect of legal fees were funded by connected parties, usually Mr Barnett. Thus if one regards the legal fees as improperly paid and also has regard to the payment by Mr Barnett to WCL, the funded legal fees would not add to the deficit. Conversely, if WCL was entitled to pay legal fees out of its assets, those payments do not go to increase the deficit but Mr Barnett’s payments to WCL would serve to reduce the deficit. Further, as I understand it, WCL’s schedule is not even handed in relation to payments between WCL and WDL in relation to matters which were the subject of the side agreement. The schedule does not show the payment of £125,000 from WCL to WDL as increasing the deficit but shows the payment of £125,000 from WDL to WCL as decreasing the deficit. WCL’s schedule purports to show that in place of the deficit contended for by Ross River, connected parties have actually funded WCL to the net extent of about £150,000. However, as I have indicated quite apart from the dispute about legal fees, that figure will have to be altered to reflect: (1) the fact that the deficit has to be calculated by reference to the evidence at the trial and not be reference to matters raised for the first time in WCL’s schedule; (2) an increase in the deficit of, possibly, as much as £151,820 for so called office costs; and (3) an increase in the deficit of £120,000 for wrongly paid management fees.
277.	Ross River has replied to the WCL schedule. Ross River has made various points about that schedule and has suggested a recalculation of it to reflect the payments under the side agreement, the double counting of administration costs, the giving of notional credits for matters such as administration and management fees. Ross River’s recalculation of WCL’s schedule suggests a deficit in excess of £522,000. This recalculation assumes that WCL was entitled to use its assets to pay its legal fees. I understand (although this has not been explained) that the difference between the amount of the deficit spoken to by Ross River’s accountant and the figure of £522,000 is largely due to the fact that Mr Barnett has paid substantial sums to WCL in recent times, although he did so in order to fund WCL’s payments of legal fees.
278.	I will now comment on the issue between the parties as to WCL’s entitlement to use its assets to pay the legal fees it has incurred in connection with its defence of this claim. I would have been prepared to decide this question in this judgment. However, in its closing submissions, Ross River suggested that this question should be further considered following judgment when Ross River would cite authority in support of its view. WCL did not appear to object to Ross River dealing with the matter in this way. Accordingly, what follows is only a provisional indication of my thinking and if one or other party wishes to submit that the following approach is wrong, then the question can be considered again following the handing down of this judgment. The prima facie position is that WCL’s assets are not trust assets and that when it is sued it can have recourse to its assets to pay the necessary legal fees in relation to defending itself. Ross River submits that WCL is a mere nominal party in this litigation. It is said that the present dispute is akin to a dispute between two shareholders in a company where the only real disputants are the shareholders. In such a case, even if the company were a party to the proceedings in relation to such a dispute, the company would be a nominal party only. At present, I can see no basis for that view in this case. The proceedings claim a whole series of remedies to which WCL is more than a nominal party. I will take two examples only. The claim for a determination of the sum payable by WCL to Ross River is a claim which can only be brought against WCL. WCL is the only party liable to make the payment of the Development Profit pursuant to the JVA. Secondly, the claim to payment under the side agreement is against WCL only. At present, it seems to me to follow that WCL is entitled to pay the legal fees which it incurs in defending this litigation. There was no evidence as to the basis of the legal fees paid by WCL. Without such evidence, I am in no position to assess whether the fees were reasonable. At present, I am also in no position to assess whether WCL is paying more than its own legal fees and is paying legal fees which more properly ought to be borne by Mr Barnett or where, at least, Mr Barnett ought to make a contribution.
279.	I have now considered the evidence I have been given on which I may be able to answer the question whether WCL and Mr Barnett, in breach of their fiduciary duties to Ross River, acted in bad faith and/or used the joint venture revenues to benefit connected parties (or Mr Barnett himself) to the disadvantage of Ross River. My overall assessment is that something will still depend on the final figure for Net Profits, which will be calculated in accordance with my findings but which has not yet been determined. There are also loose ends raised by the written submissions made following the conclusion of the oral hearing. I have indicated my findings in relation to most if not all of the contentious matters but it remains necessary to calculate the resulting deficit. My expectation is that when the calculations are done, then it will be revealed that WCL and Mr Barnett have used the revenues from the joint venture in a way which has jeopardised Ross River’s right to payment under the JVA and the side agreement and that WCL and Mr Barnett were in breach of fiduciary duty accordingly. I will indicate in due course what needs to be done following judgment to finally determine any outstanding matters in this respect.
Accessory liability
280.	In addition to the direct claim against Mr Barnett for breach of the personal fiduciary duty owed by him, Ross River has contended that he is liable as an accessory for the wrongs of WCL. It was said that Mr Barnett had procured WCL to break the alleged implied terms of the JVA. As I have held that no such terms are to be implied, accessory liability of this kind does not arise.
281.	It is also said that Mr Barnett is liable for dishonestly assisting WCL to break its fiduciary duty to Ross River. As I have held that Mr Barnett owed a personal fiduciary duty to Ross River it is not necessary to investigate whether Ross River has established the necessary dishonesty on his part. It might be said that it would be appropriate to deal with this claim in the alternative to my findings as to Mr Barnett’s personal liability as a fiduciary in case an appellate court concludes that Mr Barnett did not owe personal fiduciary duties but that WCL did owe fiduciary duties to Ross River. As against that, for the reasons that I have already explained, there remain loose ends in relation to the breach by WCL of its fiduciary duties and while that is so, it appears to me to be inappropriate to investigate the question of dishonesty in relation to transactions and payments which have not yet been precisely identified.
282.	It is also said that Mr Barnett conspired with WCL and Mr Harney to injure Ross River by unlawful acts, including the breaches of fiduciary duty by WCL. As before, I conclude that as it is not necessary to consider this possible head of accessory liability, it would not be appropriate to do so.
The next steps
283.	In this judgment, I have determined all of the questions which were raised at the trial as to the calculation of Net Profits pursuant to the JVA. At the trial, I was told that when I determined those matters, all that remained for the purpose of calculating Net Profits was for the accountants to calculate the sums which ought to have payable by WCL by way of bank charges and interest in relation to joint venture matters. I was told that there was reason to believe that the accountants could agree the necessary calculation.
284.	When the amount of Net Profits is finally calculated, then the sum payable to Ross River for Development Profit will be known and will be payable by WCL to Ross River. I have already explained my conclusion as to when the sums due under the side agreement are payable by WCL to Ross River.
285.	It remains to be seen whether WCL will make the payments due to Ross River. If it does, then Ross River will not have suffered any damage by reason of WCL and Mr Barnett having run up a deficit as between WCL and connected persons which, for the reasons given earlier, has probably (subject to further detailed calculation) jeopardised WCL’s ability to pay Ross River the full amount due to it. If it turns out that WCL does not pay the full amount due to Ross River, then it will be appropriate to consider an assessment of any equitable compensation payable by Mr Barnett for any breach by him of his fiduciary duty. Damages cannot be assessed at this stage because: (1) Ross River has not yet suffered damage; (2) the extent of any breach of duty by Mr Barnett has not been finally determined; (3) the quantum of loss may simply be the amount of the shortfall in the payment to Ross River due to Mr Barnett’s actions or it may involve a more complex assessment of the position of other creditors of WCL and the effect of the burden on WCL of the legal fees it has incurred. In the course of closing submissions, I raised the  possibility that in place of an award of equitable compensation, the court might be prepared to order Mr Barnett to restore to WCL the sums which Mr Barnett caused WCL to pay away to himself or to third parties in a way which placed Mr Barnett in breach of fiduciary duty to Ross River. If I had been able to calculate at the time of giving this judgment what that sum was, I may have been prepared to make an order to that effect. However, the fact that I am not yet able to calculate the sum in question means that I am not now in a position to make such an order. If that possibility needs to be considered in the future, I expect I will need to have submissions on the effect of such an order and whether the effect will depend on a need to consider the position of other unsecured creditors of WCL. 
286.	There are plainly many matters which will need to be considered following the handing down of this judgment. Some of these matters I have already referred to. In addition, I was told at the trial that following judgment, there will be other matters, such as costs, where the parties will want to make detailed oral submissions. In these circumstances, I will hand down this judgment and adjourn all matters arising to a date to be fixed. That will give the parties time to consider the points which are outstanding, to prepare skeleton arguments for an oral hearing in relation to those matters and to provide a realistic time estimate for that hearing.

APPENDIX I

DATED 		23rd December				2004

ROSS RIVER LIMITED 
acting as general partner of 
York Development Limited Partnership

and

WAVELEY COMMERCIAL LIMITED

and

Messrs.  BARNETT and HARNEY

A G R E E M E N T

relating to freehold land at 
Bedford Street Ampthill 
in the County of Bedford

Williams & Co
3 Woburn Street
Ampthill
Beds, MK45 2HS

DATED 		23rd December						2004 

A N   A G R E E M E N T  made  B E T W E E N :

(1)	ROSS RIVER LIMITED (Company No.111965C) a company incorporated in the Isle of Man whose registered office is at Skanco Court Cooil Road Braddan Isle of Man IM2 2SR acting as general partner of York Developments LP a Limited Partnership registered in the Isle of Man (“YDLP”) 

(2)	WAVELEY COMMERCIAL LIMITED (Company No. 05308625) whose registered office is situate at 4 Goldington Road Bedford MK40 3NF ("the Promoter") and

(3)	PETER COLIN BARNETT ("PCB") of  PO Box 75204 Dubai United Arab Emirates and whose address for service in the United Kingdom is care of Waveley Developments Limited 3b Cromelea Business Park Madingley Road Cambridge CB3 7PH and PAUL CHRISTOPHER HARNEY of Highcroft Cranes Lane Kingston Cambridge CB3 7NJ  ("the Guarantors")

W H E R E B Y   IT IS AGREED as follows:

1.	DEFINITIONS AND INTERPRETATION

1.1	In the Agreement unless the context otherwise requires:

“Accountant”	means a Chartered Accountant appointed and acting in accordance with the provisions of clause 15.3 who has at least 10 years experience of property development and planning matters

“Accounting Standards”	mean in relation to any accounts any of the following in force on the relevant date: any applicable Statement of Standard Accounting Practice, Financial Reporting Standard, Urgent Issues Task Force Abstract or Statement of Recommended Practice issued by the Accounting Standards Board (or any successor body) or any committee of it all body recognised by it

“Alternative Scheme”	means a scheme of development for the Shell Site alone as agreed upon by the parties consistent with the Objectives or which is otherwise determined by the Expert to be Reasonably Practicable

"Barrister"	means a Barrister appointed and acting in accordance with the provisions of clause 15.2 who has at least 10 years experience of property development and planning matters

“Basic Profit”	means the sum of Two hundred and Fifty Thousand Pounds (£250,000.00) exclusive of VAT

“Bond”	means an on demand performance bond proposed to be issued by Barclays Bank Plc in favour of Shell UK Limited in the sum of £200,000.00 in the terms of the agreed draft bond annexed to this agreement

“Business Day”	means any day except Saturday and Sunday or any bank or public holiday

"Composite Site"	means the whole of the proposed development site at Bedford Street Ampthill for the purpose of identification shown edged red on the plan marked “Ground Floor and Site Plan” annexed to this agreement

“Decommissioning Works”	has the same meaning as that expression defined in clause 11 of the Shell Purchase Agreement

“Development Profit”	means if Satisfactory Planning Permission is granted within the Promotion Period for the Supermarket Scheme one third of the Net Profits deriving from the Composite Site or if Satisfactory Planning Permission is granted during the Promotion Period for an Alternative Scheme one half of the Net Profits deriving from the Shell Site alone

“Election Notice”	means a notice served by YDLP in accordance with clause 10

"Expert"	means an Accountant, Barrister or Surveyor appointed and acting in accordance with the provisions of clause 15

“Fall Back Option”	means the option granted to YDLP pursuant to clause 11

“Financial Proposal”	means the financial proposal prepared by the Promoter and annexed to this agreement and as may be modified and updated from time to time setting out so far as such figures are available at the date of this agreement the base costs to be used for the purposes of calculating Net Profits

“GAAP”	means generally accepted accounting standards, principles, policies, practices, conventions and methods of valuation applied in the preparation of financial statements in the United Kingdom

"Interest "	means 2% above the base rate from time to time of the Bank of England calculated on the basis of a 365 day year with yearly rests both before and after any judgment

“Net Profits”	means the sum calculated in accordance with the principles expressed in Part II of the Schedule

“Objectives”	means such development of the Composite Site or the Shell Site that is Reasonably Practicable in accordance with all necessary planning permissions and consents required to implement the development as will accord with the objectives as set out in clause 3 as may be supplemented by the parties from time to time during the course of this agreement

“Option Completion Date”	means a date which is either three months from the date of service of the Option Notice or three months from the extended date calculated by reference to clause 10.3 whichever is the later
 
“Option Notice”	means notice served by the Promoter exercising the Promoter’s Option pursuant to clause 9

"Planning Agreement"	means an agreement with the local planning authority or a unilateral undertaking by the parties pursuant to Section 106 Town and Country Planning Act 1990 (as amended)

“Promoter’s Option”	means the option granted pursuant to clause 9 for the Promoter to purchase the Shell Site in the circumstances therein described

“Promotion Period”	means the period commencing on the date of this agreement and ending at 5pm on 31st December 2005 or if that date is not a Business Day then at 5pm on the next Business Day thereafter

“Purchase Expenses”	mean the costs and expenses set out or referred to in Part I of the Schedule	

"Purchase Price"	means the sum of ONE MILLION THREE HUNDRED THOUSAND POUNDS (£1,300,000.00) exclusive of VAT

“Reasonably Practicable”	means in relation to the Supermarket Scheme (or if applicable an Alternative Scheme as the case may be) that is:
•	profitable (that is; having regard to anticipated costs and realisable values giving a return on capital and investment that is reasonable taking into account the costs size risks and complexity of the development) and
•	reasonably achievable in a practicable manner 
	and which in default of agreement by the parties shall be determined by the Expert Accountant

 “Satisfactory Planning Permission”	means the consent of the local planning authority comprising a planning permission for either the Supermarket Scheme or an Alternative Scheme which in either case satisfies the requirements of clause 6

“Shell Purchase Agreement”	means the contract in the agreed form annexed for the acquisition by YDLP of the Shell Site

“Shell Site”	means the whole of the land more particularly described in the Shell Purchase Agreement and being briefly known as the Shell Petrol Filling Station Bedford Street Ampthill Bedfordshire

“the Standard Sale Price”	means the sum calculated in accordance with the principles set out in Part III of the Schedule

“the Supermarket Scheme”	means the proposed redevelopment of the Composite Site to comprise a retail food supermarket of approximately 18,500 net square feet with 11,500 square feet back up areas and 16 flats (11,400 square feet) and 4 shops (26,590 square feet) the provision of public  long term and short stay car parking facilities public conveniences and all ancillary works and uses as may be required by the terms of Satisfactory Planning Permission

"Surveyor"	means a Chartered Surveyor appointed and acting in accordance with the provisions of clause 15.4 who has at least 10 years experience of property development and planning matters

“VAT”	means Value Added Tax

1.2	References in this agreement to any statute shall include any statute or instrument replacing modifying or giving effect to the same and any instrument or order made subsidiary thereto or relating to the implementation thereof

1.3	Unless the context otherwise requires references in this agreement to the singular shall include the plural and vice versa

2.	Preliminary:

2.1	The Promoter’s intention was previously to redevelop that part of the Composite Site under its control principally as a retail supermarket

2.2	The local planning authority have resolved to grant such planning permission subject to completion of a Planning Agreement and subject also to planning permission being granted elsewhere in Ampthill to cater for long stay car parking requirements of the Town

2.3	The relocation of long-term car parking from the current town car parks has proved problematical

2.4	The Promoter has negotiated the acquisition of the Shell Site in accordance with the terms of the Shell Purchase Agreement

2.5	It is envisaged by the parties that by acquiring the Shell Site planning permission will be granted for the Supermarket Scheme which will incorporate the required short stay and long-term parking requirements within the Composite Site

2.6	YDLP has agreed to assist the Promoter by acquiring the Shell Site and the parties have agreed to enter into this agreement as a joint venture 

3.	Objectives:

3.1	Initial Objectives:

	The initial objectives of the parties in entering into this joint venture are as follows:

	3.1.1.	To maximise the profits arising from the development of the Supermarket Scheme upon the Composite Site

	3.1.2	To provide for the Decommissioning Works (as defined in the Shell Purchase Agreement) and for the remediation of any contamination of the Shell Site and to otherwise comply with the terms of clause 11 of the Shell Purchase Agreement  

	3.1.3	To use all reasonable endeavours to obtain planning permission for the development of the Composite Site in accordance with the Supermarket Scheme

	3.1.4	To acquire or bring under the parties control all outstanding freehold and leasehold interests comprised in the Composite Site including in particular the freehold of the current car parks within the Composite Site currently within the ownership of Ampthill Town Council 

	3.1.5	To negotiate and agree terms with a supermarket operator and/or an investment fund for the funding and construction of the supermarket upon the Composite Site in accordance with the Supermarket Scheme and for the sale of the supermarket to that operator or to the nominated investment fund and to dispose of all residual development interests with a view to maximising the development profit

	3.1.6	In order to minimise project costs the parties will seek to agree the sale of the Composite Site in advance of letting the contract for the construction of the supermarket under a composite design and build scheme (it being envisaged YDLP will be a party thereto in order to secure payment to it of any Development Profits to which YDLP becomes entitled and elects to receive) with a sale of the completed supermarket to the nominated investment fund subject to the terms of a pre-agreed lease to the supermarket operator

	3.1.7	To share in the profits arising from the development in the manner provided in this agreement at the earliest practicable time

3.2	Alternative Objectives

	If the parties agree (or the Expert determines) that it is not Reasonably Practicable within the Promotion Period to obtain a Satisfactory Planning Permission for the Supermarket Scheme the parties objectives will change to the following:

	3.2.1	To maximise the profits deriving from development of the Shell Site alone by obtaining a Satisfactory Planning Permission for such use (other than the Supermarket Scheme) that the parties agree stands the best chance of success.  Principally the parties contemplate such development may take the form of sheltered housing accommodation or other intensive residential use alternatively a mixed commercial retail and residential use

		The parties do not intend that this stage to commit to a particular Alternative Scheme but if this section applies and the parties are unable to reach agreement upon such Alternative Scheme the same will be determined in accordance with clause 15 by the Expert Surveyor who shall make his award on the basis of the scheme as presented by either party which in his opinion is Reasonably Practicable

	3.2.2	To dispose of the Shell Site with the benefit of Satisfactory Planning Permission for the alternative use and to share in the profits arising from the sale in the manner provided in this agreement. The parties may subsequently agree (subject to procuring development finance) to procure the construction of the development permitted by the Alternative Scheme

3.3	Fallback objectives:

	To regulate the position between the parties in circumstances where a Satisfactory Planning Permission is not obtained within the Promotion Period or the Promoter does not exercise the Promoter's Option within the Promotion Period

4.	Purchase of the Shell Site and Decommissioning Works

	YDLP agrees with the Promoter that YDLP:

	4.1	to the extent that it has not already done so will register with Customs & Excise for VAT purposes and elect to waive exemption from VAT in respect of the Shell Site prior to entering into the Shell Purchase Agreement. After the acquisition of the Shell Site will use all reasonable endeavours to reclaim VAT paid by YDLP pursuant to its obligations contained in this agreement and in particular but without limitation to obtain a refund of VAT upon the purchase price of the Shell Site and the Purchase Expenses and to confirm to the Promoter when this has been achieved

	4.2	to procure the Bond in the sum of £200,000.00 from Barclays Bank Plc in favour of Shell UK Limited in the form of bond annexed to this agreement to secure completion of the Decommissioning Works and to pay the premium and procuration fees for the provision of the same	

	4.3	at its own cost to purchase in the name of the general partner but held on trust for YDLP the Shell Site in accordance with the Shell Purchase Agreement and pay the Purchase Expenses

	4.4	will register title to the Shell Site at HM Land Registry and to include a Restriction in the Proprietorship Register of such title in the Land Registry’s standard form of Restriction to the effect that no disposition of the Property by the Registered Proprietor or by the Proprietor of any registered charge is to be registered without the prior written consent of the Promoter or its solicitors during the Promotion Period

	4.5	will undertake with the Promoter on completion of the purchase of the Shell Site that neither YDLP not its general partner will cause or suffer any debenture mortgage charge or other financial encumbrance to be created or registered at the Companies Registry which relates to or affects or is capable of affecting the Shell Site nor at the Land Registry against title to the Shell Site during the Promotion Period without the prior written consent of the Promoter such consent not to be unreasonably withheld or delayed Provided Always that the Promoter will not be unreasonably withholding its consent if the creation of the debenture mortgage charge or other financial encumbrance will have priority to the Promoter’s Option granted by this agreement and in the meantime YDLP warrants that neither it nor its general partner have caused or suffered any debenture mortgage charge or other financial encumbrance to be created which may have priority to the Promoter’s Option

	4.6	in consultation with the Promoter give written notice to terminate Shell’s continuing occupation of the Shell Site pursuant to clause 3.6 of the Shell Purchase Agreement

	4.7	will be responsible for payment of the cost of all reports and assessments which the Promoter obtains with the consent of YDLP (such consent not to be unreasonably withheld or delayed) pursuant to its obligations hereunder as may be required in order to assess the costs of carrying out the Decommissioning Works and to pay the invoices for the same within 10 Business Days of the Promoter submitting such invoices to YDLP for payment Provided Always that all such cost shall be added to the Purchase Expenses

	4.8	subject to the parties having agreed upon the contractor to be engaged to carry out the Decommissioning Works and his quotation for the works (or in default of agreement such contractor as selected by the Expert Surveyor) to pay to the contractor the cost of  the Decommissioning Works when reasonably requested by the contractor so to do

	4.9	to obtain reimbursement from Shell UK Limited of the costs of the Decommissioning Works in excess of £60,000.00 in accordance with clause 4.5 of the Shell Purchase Agreement

	The Promoter agrees with YDLP that the Promoter will:

	4.10	at the earliest practicable date consistent with the Objectives obtain all reports and assessments that the Promoter considers appropriate to assess the extent of the Decommissioning Works and to obtain quotations from three independent contractors for carrying out the Decommissioning Works in accordance with the Shell Purchase Agreement

	4.11	to agree with YDLP the contractor to be appointed in accordance with the Shell Purchase Agreement to carry out the Decommissioning Works and to negotiate the contract terms on behalf of YDLP and to let the contract to the appointed contractor

	4.12	during the course of the Decommissioning Works to make all arrangements to ensure that YDLP’s obligations pursuant to clause 11 of the Shell Purchase Agreement are fully complied with in all respects to Shell’s reasonable satisfaction and to satisfy all legal requirements

	4.13	to use all reasonable endeavours to ensure the Decommissioning Works are completed within six months of the date that vacant possession of the Shell Site is obtained  

	4.14	to obtain from Shell UK Limited and the local environmental health officer  appropriate confirmation that the Decommissioning Works have been completed and are satisfactory

5.	Promotion of the Supermarket Scheme (or an Alternative Scheme) in accordance with the Objectives

5.1	The Promoter using its expertise and in consultation with the YDLP will at the earliest practical date submit or procure the submission of a planning application to the local planning authority for the Supermarket Scheme. If necessary and after consultation with YDLP the Promoter will submit any revised planning application that may be reasonably required in order to fulfil the Objectives

5.2	All planning applications must be submitted in the joint names of YDLP and the Promoter 

5.3	Following submission of a planning application the Promoter will use all reasonable endeavours to obtain a Satisfactory Planning Permission for the Supermarket Scheme as soon as reasonably practicable. In the event a Satisfactory Planning Permission for the Supermarket Scheme is not obtained or is not Reasonably Practicable to submit a planning application for the Alternative Scheme upon the Shell Site alone 

5.4	The Promoter will: 

	5.4.1	keep YDLP advised of progress with all planning representations meetings applications planning appeals and the issue of planning permission and the negotiation of any Planning Agreements and will supply YDLP with copies of all material documents and correspondence on a timely basis

	5.4.2	give YDLP reasonable notice of all meetings associated with the promotion of the Supermarket Scheme (and if applicable the Alternative Scheme) and the planning application or in respect of any proposed Planning Agreement or infrastructure constraint to take place with the planning and other authorities and with the Promoters external consultants and meetings with other landowners holding interests within the Composite Site and permit the representative of YDLP to attend and participate in such meetings

	5.4.3	have due regard to any comments and proposals made by YDLP in respect of any matter referred to in clause 5.4.1 and to make any reasonable representations to the appropriate authorities that may be requested by YDLP 

5.5	The Promoter and YDLP will sign all documents and YDLP will provide all assistance reasonably necessary to submit and conduct the planning application(s) whenever reasonably requested by the Promoter in order to obtain a Satisfactory Planning Permission

5.6	YDLP will not make or procure any other party to make any objections to any planning representations made by the Promoter (if made according to the provisions of this Agreement) in respect of any planning application submitted by the Promoter

5.7	If as a condition of granting planning permission or if in the opinion of the Promoter it is reasonably necessary or desirable in order to obtain a Satisfactory Planning Permission that planning obligations are provided then the Promoter will enter into negotiations with the local planning authority and all other relevant authorities and in consultation with YDLP will use reasonable endeavours to minimise the extent and cost of any such planning obligations

5.8	The parties will forthwith enter into and execute all Planning Agreements as are either properly required by the local planning authority as a condition of granting planning permission or which in the opinion of the Promoter is reasonably necessary or desirable to obtain a Satisfactory Planning Permission the executed agreement to be returned to the Promoter within 10 Business Days after service of the Planning Agreement on YDLP provided that:

	5.8.1	YDLP has previously approved the terms included in the agreement such approval not to be unreasonably withheld or delayed and such approval will be deemed to be given if YDLP does not notify the Promoter in writing of any objection which it has to any term within 20 Business Days of receipt of a written request from the Promoter to approve any term of such agreement provided that YDLP will not object to any term included in the Planning Agreement which complies with the planning policies of the local planning authority and/or government planning policies though this will not prevent YDLP objecting to the quantum of any particular term if that is not specified by the relevant planning policy 

	5.8.2	YDLP’s liability is limited to the extent of the land within its ownership and 

	5.8.3	The agreement does not impose any actual or potential liability on YDLP unless and until any development of the appropriate part of the Composite Site is commenced and

	5.8.4	The agreement provides for the liability of YDLP to be released once it has disposed of all its interest in the Shell Site
	
5.9	In the event of a refusal or non determination by the local planning authority of any planning application or the imposition of onerous conditions attached to a planning permission the Promoter shall consult with YDLP and if agreed that an appeal stands a reasonable chance of success the Promoter shall appeal against such refusal or non determination of the planning application or the imposition of conditions attached to the planning permission or submit a further planning application and the Promoter is entitled to repeat this procedure as often as it requires during the Promotion Period PROVIDED ALWAYS that such appeal or further planning application is reasonably likely to result in a planning permission for the Supermarket Scheme within the Promotion Period and if YDLP and the Promoter are unable to agree as to whether an appeal should be submitted or whether a further planning application should be submitted the question will be referred to an Expert Barrister in accordance with clause 15 for determination and the parties will take the action the Expert recommends

6.	Satisfactory Planning Permission
 
6.1	Upon the issue of planning permission the parties will meet to agree whether the same constitutes a Satisfactory Planning Permission.  If neither party objects to the planning permission or any conditions attached to it within a period of 15 Business Days of the date of receipt of the planning permission by  that party  the parties will be deemed to have accepted that the planning permission is a Satisfactory Planning Permission for the purposes of this agreement

6.2	If either party objects to the planning permission or any conditions attached to it within the period referred to in clause 6.1 and serves written notice upon the other party accordingly stating that party’s reasons for the objection the parties will attempt to agree a course of action whether by way of appeal against the imposition of conditions attached to the planning permission or the submission of a further planning application and if the parties are unable to reach agreement upon the appropriate action the same will be determined by an Expert Surveyor in accordance with clause 15

7.	Promotion and Technical Data Reports and Costings involved in Obtaining Satisfactory Planning Permission and for Development of the Supermarket Scheme

7.1	The Promoter will be responsible for arranging payment for all planning representations planning applications building regulation approvals and approval of reserved matters Planning Agreements and if necessary any planning appeal  

7.2	The Promoter will arrange for all investigations reports or design work which are required to be carried out in order to obtain any planning permission or which are necessary for the development marketing and promotion of the Composite Site including the construction of the Supermarket Scheme by the appropriate time that each may reasonably be required and in particular the Promoter will arrange for:-

	7.2.1	the preparation and production of any reports assessments investigations management plans and strategies required by the local planning authority as part of the planning application or as required to assess the feasibility of the construction and development of the Supermarket Scheme and a valuation of the completed project

	7.2.2	the production of a detailed boundary and topographical survey of the Composite Site

	7.2.3	the preparation and production of reports on available mains services and infrastructure including the assessment of the capacities required in order to serve the Supermarket Scheme and a quotation of the costs associated with the provision of the same

	7.2.4	all appropriate soil tests and preliminary site investigations to be undertaken and for the  production of a report clarifying any abnormal works as may be required in the course of the proposed development (for example but not limited to abnormal foundation works) and identifying the estimated additional costs involved

	7.2.5	all design work associated with the development of the Supermarket Scheme and the funding of construction of the same and produce a report identifying any elements of abnormal costs involved or contingencies that may have to be provided for

7.3	The Promoter will consult with YDLP and provide to it copies of all reports tests surveys and costings as soon as reasonably practicable and will at all times keep it fully informed
	
7.4	All external consultants appointed to deal with any of the matters referred to in clause 7.2 will be appointed in the joint names of the Promoter and YDLP and where appropriate such appointment will be on the basis that any report or design work produced will be capable of assignment to a third party purchaser together with the benefit of an appropriate warranty

7.5	the Promoter will provide or use all reasonable commercial endeavours to procure the remaining parts of the Composite Site in the event of grant of Satisfactory Planning Permission for the Supermarket Scheme at the cost thereof as identified in the Financial Proposal or where as yet no acquisition cost has been negotiated then on terms previously agreed between the parties in writing. If YDLP disagrees with any intended acquisition cost or supplemental option fee or professional fees to be incurred by the Promoter in accordance with the Promoters responsibilities pursuant to this clause the matter in question will be referred to the Expert Surveyor for determination

7.6	In so far as the parties agree (or otherwise the Expert Surveyor on the application of either party at any time determines pursuant to clause 15) that the Supermarket Scheme is not Reasonably Practicable the Promoter will repeat the above processes or such of them as shall be required in order to seek and obtain planning permission for development of the Shell Site for an Alternative Scheme consistent with the Objectives but unless otherwise agreed between the parties the Promoter will not be required to work up detailed assessments and costings for the construction of such development it being the present intention of the parties that if planning permission is granted for the Alternative Scheme the Shell Site will be sold with the benefit of planning permission but (save for Decommissioning Works and the remediation of contamination) in its undeveloped state.

7.7	The Promoter will be responsible for payment of all fees and expenses incurred in respect of all obligations contained in this clause and will provide YDLP with copies of all invoices and accounts. All such fees and expenses will be added to the base costs and will be taken into account in assessing Net Profits.

7.8	Neither the Promoter nor YDLP shall be responsible for the other's costs or for those of the other's representatives incurred in attending meetings or in exercising any of its rights or complying with any of its obligations under this Agreement unless specifically provided otherwise

8.	Negotiations for the Disposal of the Composite Site or the Shell Site (as appropriate)

If a Satisfactory Planning Permission has been obtained for the Supermarket Scheme the Promoter will use all reasonable endeavours:

8.1	(if it has not already done so) to identify in consultation with YDLP a supermarket operator interested in purchasing the supermarket comprised within the Supermarket Scheme. 

8.2	to negotiate:

	8.2.1	a contract for the sale of the Composite Site to an Investment Fund nominated by the supermarket operator 

	8.2.2	a contract for the construction of the Supermarket Scheme and 

8.2.3	the terms of a lease of the supermarket by the investment fund to the supermarket operator

keeping YDLP informed of all material correspondence and documentation and supplying copies thereof to YDLP as soon as reasonably practicable but not to conclude any documentation without the consent of YDLP such consent not to be unreasonably withheld or delayed

If a Satisfactory Planning Permission has been obtained for an Alternative Scheme the Promoter will use all reasonable endeavours to provide YDLP with copies of such professional advice and reports the Promoter obtains in order to decide the best way to market and dispose of the Shell Site with a view to maximising the sale price

9.	The Promoter’s Option

9.1	YDLP grants to the Promoter the Promoter’s Option during the Promotion Period to purchase the Shell Site

9.2	the Promoter’s Option may be exercisable at any time within three months of the date that a planning permission is declared by the parties to be a Satisfactory Planning Permission or in the absence of such declaration the date a planning permission is deemed to be a Satisfactory Planning Permission pursuant to clause 6.1 of this agreement Provided Always that the Promoter may at any time elect by notice in writing to YDLP to waive the requirement to obtain a Satisfactory Planning Permission and instead proceed to exercise  the Promoter’s Option

9.3	upon service of a valid Option Notice that Option Notice and this agreement shall constitute a contract for the sale and purchase of the Shell Site and the Standard Commercial Property Conditions (First Edition) shall apply thereto so far as they are not inconsistent with the provisions of this agreement

9.4	unless exercised by the service of a valid Option Notice (in accordance with this agreement) the Promoter's Option will lapse on the expiration of the Promotion Period in which event the Promoter will forthwith cause all entries registered in the registers of title to the Shell Site and the Restriction noted therein pursuant to clause 4.4 above to be cancelled and removed.  The Promoter appoints YDLP's general partner its attorney to sign and submit all such applications for cancellation and removal to the Land Registry in its name

9.5	the parties shall (subject to compliance with the terms of this agreement) be bound to complete the sale and purchase of the Shell Site on the Option Completion Date (or on the next succeeding business day if completion would otherwise fall on a non-business day)

9.6	YDLP will in the transfer of the Shell Site grant to the transferee (so far as it is able to do so) all rights easements and privileges as the transferee shall reasonably require for the benefit of the Shell Site and the Shell Site shall be transferred subject to and (where appropriate) with the benefit of the exceptions and reservations contained or referred to in the registers of title to the Shell Site and subject to such of the covenants restrictive of user set out in the charges register of such title that relate to or affect the Shell Site and which are capable of being enforced and the transferee shall assume any outstanding contractual obligations relating to the Shell Purchase Agreement or the letting of the Decommissioning Works on the part of YDLP

9.7	YDLP will sell with full title guarantee save that such covenants will be qualified in the same manner as the title guarantee covenants given by Shell U.K. Limited in the transfer of the Shell Site to YDLP

9.8	the Shell Site will be sold with vacant possession on completion

10.	YDLP’s Right to Profit and of Election

10.1	subject to clause 10.2 the Promoter shall pay to YDLP upon completion of the sale of the Shell Site the Standard Sale Price and the Basic Profit

10.2	YDLP may by serving an Election Notice upon the Promoter to such effect elect to forgo the Basic Profit and instead to receive the Development Profit in addition to the Standard Sale Price

10.3	the Election Notice may be served at any time within the period of one month from the date of service by the Promoter of a valid Option Notice upon YDLP Save That if at the time the Promoter serves the Option Notice YDLP is of the opinion (acting reasonably) that it is not in possession of all material reports and costings required to be produced to it by the Promoter pursuant to the Promoter’s obligations in this agreement the period in which the Election Notice may be served will be extended to expire one month from the date that the Promoter produces the remaining material required of it

10.4	if the parties are unable to agree whether any information is required to be produced by the Promoter to YDLP pursuant to clause 10.3 the question of what if any additional information is to be provided will be referred to the Expert Surveyor for determination pursuant to clause 15 

10.5	the Development Profit will be payable by the Promoter to YDLP at such times and in such manner as the parties agree consistent with the Objectives but in the event of any disagreement as determined by the Expert Accountant pursuant to clause 15 But Provided Always no party shall receive Development Profits in advance of the other and the Development Profit will be distributed as soon as practicable following receipt 

11.	The Fall Back Option

11.1	If a Satisfactory Planning Permission is not obtained within the Promotion Period or the Promoter does not exercise the Promoter’s Option during the Promotion Period YDLP shall have the right to serve upon the Promoter notice exercising the Fall Back Option at any time within one month of the expiration of the Promotion Period

11.2	If YDLP serves a valid notice exercising the Fall Back Option within the time referred to in clause 11.1 that notice and this agreement shall thereupon constitute a contract for the sale by YDLP to the Promoter of the Shell Site at the Standard Sale Price and otherwise upon the same terms as set out in clauses 9.3, 9.4 and 9.6 – 9.8 and completion of such sale will take place on a date which is three months from the date of service of YDLP’s notice exercising the Fall Back Option (or on the next succeeding Business Day if completion would otherwise fall on a non-Business Day). For the avoidance of doubt if YDLP serves notice upon the Promoter exercising the Fall Back Option YDLP shall not be entitled to receive the Basic Profit nor to elect to receive the Development Profit but shall be paid the Standard Sale Price only

11.3	Provided Always That if the Promoter shall not have exercised the Promoter’s Option and YDLP shall not have exercised the Fall Back Option each according to its terms then this agreement shall lapse and be of no further effect save in respect of the enforcement of any antecedent breach by one party of its obligations prior to the date of lapse which enforcement powers shall remain in full force and effect notwithstanding 

11.4	Subject to clause 11.3 the Guarantors hereby jointly and severally undertake with YDLP that if YDLP serves a valid notice exercising the Fall Back Option to ensure that the Promoter (or any assignee permitted under the terms of clause 13.4) fulfils its obligations pursuant to clause 11.2 failing which they (or a person nominated by them) will complete the purchase of the Shell Site on the same terms and at the same time and such obligation shall continue notwithstanding that the Promoter (or any assignee permitted as aforesaid) may go into liquidation and the liquidator disclaims this agreement and notwithstanding any extension of time or other indulgence granted by YDLP or any other act or omission whereby but for this provision the Guarantors would be exonerated either wholly or in part from their obligations contained in this clause

11.5	PCB further undertakes with YDLP to procure that Bradcliffe Limited will assign the benefit of its existing options and any further options/contracts for purchase it may acquire in the meantime in relation to the Composite Site and its freehold estate comprising Rose Walk as and when called upon to do so by the Promoter (or if the Promoter defaults upon the request of YDLP) pursuant to and in accordance with the terms of clause 7.5

12.	Completion of the Sale of the Shell Site

12.1	completion of the sale and purchase of the Shell Site shall take place (subject to compliance with the terms of this agreement) at the offices of YDLP's solicitors or at such other place as the parties shall mutually agree not later than 3 PM on the Option Completion Date

12.2	upon completion YDLP shall cause to be delivered to the Promoter:

	12.2.1	the duly executed transfer of the Shell Site in favour of the Promoter or such other transferee as the Promoter shall reasonably require by service of notice in writing to that effect upon YDLP not less than 14 Business Days prior to the Option Completion Date 

	12.2.2	a Vat Invoice for the Standard Sale Price

	12.2.3	all title deeds relating to the Shell Site in the possession of YDLP

	12.2.4	the original title indemnity insurance policy referred to in clause 2.1 of the Shell Purchase Agreement

	12.2.5	all documentation reports guarantees and collateral warranties in the possession of YDLP relating to the Decommissioning Works

12.3	at completion:
	
	12.3.1	YDLP will assign by way of deed of assignment in such form as the Promoter may reasonably require to the Promoter or to whom the Promoter may direct:

•	the benefit of the title indemnity insurance policy referred to in clause 12.2.4

•	all guarantees and remediation rights in respect of the Decommissioning Works

	12.3.2	YDLP will also deliver to the Promoter all health and safety files and records required to be kept pursuant to the Construction (Design and Management) Regulations 1994 and all certificates of due compliance with legal requirements for the remediation of the Shell Site following completion of the Decommissioning Works in its possession

	12.3.3	the Promoter will pay to YDLP the Standard Sale Price by transfer of cleared funds to a UK bank account nominated by YDLP

	12.3.4	If YDLP shall have become entitled to the Basic Profit then the Promoter will pay that Basic Profit to YDLP

	12.3.5	If YDLP has elected to receive the Development Profit the parties will endeavour to agree the method and manner of payment of the Development Profit and the means to secure payment to YDLP in the meantime and failing agreement the matter in dispute will be referred to the Expert Surveyor 

13.	Miscellaneous Matters:

13.1	Access
	YDLP will allow the Promoter its architects engineers and contractors engaged to carry out the Decommissioning Works and others authorised by the Promoter access to the Shell Site for all purposes necessary in connection with and ancillary to the Promoter’s responsibilities hereunder without obligation on the part of the Promoter to make good any damage so caused provided the Promoter arranges for the site to be kept reasonably tidy

13.2	Tenancies
	YDLP agrees with the Promoter not to grant or agree to grant any tenancy or licence or share the occupation of the Shell Site without the prior written consent of the Promoter such consent not to be unreasonably withheld or delayed

13.3	YDLP Warranty
	YDLP warrants to the Promoter to it is and will remain until the exercise or expiry of the Promoter's Option the beneficial owner of the Shell Site subject only to the Promoter’s Option but otherwise free from financial encumbrances and further that YDLP will not prior to the exercise or expiry of the Promoter's Option sell transfer mortgage charge or dispose of its interest in the Shell Site

13.4	Assignment of the benefit of this agreement
	The Promoter agrees with YDLP that the Promoter will not dispose of its interest under this agreement without the prior consent in writing of YDLP such consent not to be unreasonably withheld or delayed provided always that the Promoter will not be released from its obligations under this agreement unless and until the permitted assignee undertakes direct with YDLP to perform all the Promoter’s obligations hereunder Save That YDLP’s consent shall not be required for the transfer of the Shell Site by way of sub sale by the Promoter to the ultimate transferee if the Promoter observes the provisions of clause 12.2.1

13.5	Income from the Site and Outgoings
	Income (if any) arising from the Shell Site prior to completion of the sale of the same pursuant to the provisions of this agreement shall belong to YDLP absolutely but the cost of all outgoings which are a charge upon the property and any costs incurred in the maintenance thereof shall be a Purchase Expense  

13.6	Rights of Third Parties
	The parties to this agreement do not intend that any term of this agreement should be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999 by any person who is not party to this agreement save for permitted assignees

14.	Notices

	Any notice required to be given by any of the parties under this agreement may be given by that party personally or by its solicitor on its behalf and may be sent by post to the address of the addressee as set out in this agreement or to such other address as the addressee may from time to time have notified for the purpose of this clause or may be sent to the solicitor for the time being of the addressee.  Communications sent by post will be deemed to have been received 48 hours after posting.  In proving service by post it shall only be necessary to prove that the communication was contained in an envelope which was duly addressed and posted in accordance with this clause.

15.	Determination of Disputes

15.1	In any dispute or difference specified by the terms of this agreement to be resolved by the Expert and in any issue referred to him pursuant to this agreement for his determination the following provisions shall apply:

15.1.1	the Expert may be a Surveyor Barrister or Accountant as the circumstances set out in clauses 15.2 – 15.4 require

15.1.2	the person so appointed will be appointed to act as an expert and not as an arbitrator

	15.1.3	he will be at liberty to consider written representations by both parties

15.1.4	he may seek expert guidance or opinion on matters not within his own knowledge and expertise

	15.1.5	he will have the right to order such directions as he sees fit

15.1.6	any written representations submitted by a party to the Expert shall be copied at the same time to the other party

15.1.7	the Expert will have power to fix time limits as he considers reasonable for the submission of written representations and for compliance with directions 

15.1.8	it will be a condition of his appointment that the Expert gives reasons for his decision

15.1.9	he will be asked to endeavour to determine an issue submitted to him for determination within three months of his appointment

15.1.10 he will have power to direct the payment of his fees by the parties in the shares in which the Expert determines and

15.1.11 he will issue an award and deliver copies thereof to YDLP and to the Promoter and his decision as to the issue submitted to him for determination will be final 

15.2	Any dispute or difference between the parties concerning a question of law will be referred to an Expert Barrister for determination who shall have the powers for the conduct of his determination as contained in clause 15.1 above 

15.3	Any dispute or difference between the parties concerning a question of financial matters will be referred to an Expert Accountant for determination who shall have the powers for the conduct of his determination as contained in clause 15.1 above 

15.4	Any other dispute or difference between the parties not referred to either an Expert Barrister or Expert Accountant will be referred to an Expert Surveyor for determination who shall have the powers for the conduct of his determination as contained in clause 15.1 above 

15.5	If the parties are unwilling or unable to agree upon the appointment of the Expert the same shall be appointed on the application of either party by the president for the time being of the Royal Institution of Chartered Surveyors.

16.	VAT

	All sums payable under or by virtue of this agreement are exclusive of VAT which will be payable in addition to the amount so payable

IN WITNESS whereof the parties have executed this agreement as a deed and delivered the same on the day and year first before written

THE SCHEDULE

PART I
Purchase Expenses

1.	Any VAT charged upon the purchase of the Shell Site and any VAT paid in respect of any of the following purchase expenses that despite YDLP using all reasonable commercial endeavours it is unable to reclaim

2.	Stamp Duty Land Tax on the acquisition of the Shell Site amounting to £61,100.00

3.	Agents Fees in respect of the acquisition of the Shell Site payable to FPD Savills in the sum of £22,912.50 (inclusive of VAT)

4.	Bond costs amounting to approximately £7,000 + VAT

5.	All other charges outgoings payments and expenses reasonably incurred in relation to the purchase registration compliance with contractual obligations (save where otherwise expressly provided) and maintaining the security of the Shell Site and premiums for public liability insurance until the completion of the sale of the Shell Site or the expiration of the Promotion Period whichever is the earlier

6.	All other sums which by virtue of the provisions of this agreement are stated expressly to be included as Purchase Expenses

PART II
Calculation of Net Profits

1.	Net Profits shall be calculated in accordance with:

	1.1	principles and policies to be agreed by the parties and subject thereto

	1.2	Accounting Standards and GAAP

2.	In computing Net Profits if Satisfactory Planning Permission is granted for the Supermarket Scheme regard will be had to the base costs referred to in the Financial Proposal as may be revised from time to time and to include Interest Purchase Expenses and all payments reasonably incurred by the Promoter acquisition costs of any parts of the Composite Site including legal fees and disbursements reasonably incurred or to be reasonably incurred in assembling the Composite Site option extension fees planning fees and consultants' fees engaged in the process of obtaining Satisfactory Planning Permission and ongoing expenses reasonably incurred by the Promoter in or about the joint venture and not recoverable as Purchase Expenses and to include the full cost in commercial terms as agreed between the parties of construction of the Supermarket Scheme and all professional fees and charges relating to the development scheme all legal and professional fees incurred in contracting with the supermarket operator and/or the nominated investment fund and the premium for obtaining a title indemnity insurance policy in respect of user covenants if required by the investment fund (credit being given for the contribution made by Shell U.K. Limited)

3.	In computing Net Profits if Satisfactory Planning Permission is granted for an Alternative Scheme regard will be had to the Purchase Price of the Shell Site the Purchase Expenses and Interest and all other costs reasonably incurred by the parties in achieving the Satisfactory Planning Permission and the sale of the Shell Site and if the parties procure construction of the development envisaged by the Satisfactory Planning Permission then all development costs and fees so incurred

4.	Net Profits shall be the difference between all revenues received from the disposal of the Composite Site or (if the Alternative Scheme applies) the Shell Site and the costs fees and expenses incurred in achieving such revenues calculated in accordance with the forgoing provisions

5.	If the parties fail to reach agreement upon Net Profits the same will be determined by the Expert Accountant pursuant to clause 15.

PART III
Calculation of the Standard Sale Price

The Standard Sale Price shall be the aggregate of the sum of One Million Three Hundred Thousand Pounds (less the amount of excess Decommissioning Costs reimbursed to YDLP by Shell UK Limited pursuant to clause 4.9 of this agreement) together with:

1.	the cost of obtaining all reports and other technical information required to ascertain the extent of the Decommissioning Works

2.	the amount of the contractor’s invoice for carrying out and completing the Decommissioning Works

3.	the total amount incurred by YDLP in procuring the Bond (save for any bank fees and the like already taken into account in assessing the Purchase Expenses)

4.	the total Purchase Expenses (less VAT that YDLP has reclaimed) 

5. 	Interest from the date that payment in each case is incurred by YDLP under all of the above headings until the date of completion of the sale of the Shell Site

6.	VAT (where properly chargeable in respect of all or any of the above headings)

SIGNED AND DELIVERED as a Deed
by ROSS RIVER LIMITED general partner 
 for and on behalf YORK DEVELOPMENTS
LIMITED PARTNERSHIP in the presence of :

………………………….      Director

………………………….      Director/Secretary

SIGNED AND DELIVERED as a Deed
by WAVELEY COMMERCIAL LIMITED 
in the presence of :

………………………….      Director

………………………….      Director/Secretary

SIGNED AND DELIVERED as a Deed
by PETER COLIN BARNETT 
in the presence of :

SIGNED AND DELIVERED as a Deed
by PAUL CHRISTOPHER HARNEY 
in the presence of :

[FINANCIAL PROPOSAL]

APPENDIX II
SIDE AGREEMENT TO 
JOINT VENTURE AGREEMENT BETWEEN
ROSS RIVER LIMITED (on behalf of BLUE RIVER LIMITED PARTNERSHIP (“BRLP”)) WAVELEY COMMERCIAL LIMITED
and PETER BARNETT and PAUL HARNEY 

DATED 15th AUGUST 2005 

A N   A G R E E M E N T  made  B E T W E E N :

(4)	ROSS RIVER LIMITED (Company No.111965C) a company incorporated in the Isle of Man whose registered office is at Skanco Court Cooil Road Braddan Isle of Man IM2 2SR acting as general partner of Blue River LP (formerly York Developments LP) a Limited Partnership registered in the Isle of Man (“BRLP”) 

(5)	WAVELEY COMMERCIAL LIMITED (Company No. 05308625) whose registered office is at 40 Kimbolton Road, Bedford MK42 2NR ("the Promoter") and

(6)	PETER COLIN BARNETT ("PCB") of  PO Box 75204 Dubai United Arab Emirates and whose address for service in the United Kingdom is care of Waveley Developments Limited 3b Crome Lea Business Park Madingley Road Cambridge CB3 7PH and PAUL CHRISTOPHER HARNEY of Highcroft Cranes Lane Kingston Cambridge CB3 7NJ  ("the Guarantors")

W H E R E B Y   IT IS AGREED as follows:

The objectives of the parties entering into this side agreement (“Side agreement”) in relation to the Joint Venture Agreement dated 23 December 2004 are as follows:

1.	An introduction of capital (“Capital Introduced”) totalling £325,000 is to be paid by BRLP to the Promoter;

2.	In exchange for receiving the Capital Introduced, the Promoter agrees that BRLP should receive the sum of £235,000 as a fixed share of the Development Profit, in addition to the BRLP entitlement set out in the Joint Venture Agreement, by way of a Prior Profit Allocation (“Prior Profit Allocation”). 

3.	When the Promoters Option is exercised to purchase the Shell Site and only in the event BRLP elects to forgo the Basic Profit and opts to participate in the development as referred to in the Joint Venture Agreement then the £235,000 Prior Profit Allocation will be grossed up to reflect the BRLP entitlement set out in that agreement. In respect of the development of the Composite Site the figure will be grossed up to £352,500 or in respect of the Shell Site, the figure will be grossed up to £470,000.

4.	Repayment of the Capital Introduced and the appropriate payment of the Prior Profit Allocation will take place from the Development Profit once the Composite Site or the Shell Site is fully sold or let but the parties agree that the Guarantors may at anytime introduce funds to the Promoters to repay all or part of these amounts.

For the avoidance of doubt nothing in this Side agreement will affect the terms as set out in the Joint Venture Agreement dated 23 December 2004 between the parties save for introduction of the Capital Introduced and Prior Profit Allocation which are in addition to the those terms.

SIGNED AND DELIVERED as a Deed
by ROSS RIVER LIMITED general partner 
 for and on behalf of BLUE RIVER
LIMITED PARTNERSHIP in the presence of :

………………………….      Director

………………………….      Director/Secretary

SIGNED AND DELIVERED as a Deed
by WAVELEY COMMERCIAL LIMITED 
in the presence of :

………………………….      Director

………………………….      Director/Secretary

SIGNED AND DELIVERED as a Deed
by PETER COLIN BARNETT 
in the presence of :

SIGNED AND DELIVERED as a Deed
by PAUL CHRISTOPHER HARNEY 
in the presence of :

APPENDIX III
The Directors
Ross River Limited as General Partner of Blue River LP
Skanco Court 
Cooil Road 
Braddan 
Isle of Man 
IM2 2SR

15 August 2005

Dear Sirs

Letter Accompanying Side agreement to the Joint Venture Agreement between
Ross River Limited (on behalf of Blue River Limited Partnership (“BRLP”)), Waveley Commercial Limited (“Promoter”), Peter Colin Barnett and Paul Christopher Harney (“Guarantors”)

We the undersigned are writing in connection with the Side agreement.

We can confirm that the Promoter will be using the £325,000 Capital Introduced to fund a separate property development project (“Ashfield Grange”) being undertaken by the Guarantors which may or may not be concluded before the development covered by the Joint Venture Agreement.

The Guarantors agree to provide funds to the Promoter to repay the Capital Introduced and settle the Prior Profit Allocation in the event these are not already satisfied under the terms of the Side agreement as follows;

1.	Paul Christopher Harney personally guarantees to provide £80,000 to the Promoter at the earliest of (i) the conclusion of the Ashfield Grange project; or (ii) twelve months from the date of the Side agreement and this amount will be used by the Promoter to repay £62,500 of the Capital Introduced and £17,500 of the Prior Profit Allocation.

2.	Peter Colin Barnett personally guarantees to provide £80,000 to the Promoter at the earliest of (i) the conclusion of the Ashfield Grange project; or (ii) twelve months from the date of the Side agreement and this amount will be used by the Promoter to repay £62,500 of the Capital Introduced and £17,500 of the Prior Profit Allocation.

In addition;

3.	Paul Christopher Harney personally guarantees to provide £400,000 to the Promoter or his share of the profit from the Ashfield Grange project should this conclude earlier than the development of the Composite Site or the Shell Site covered by the Joint Venture Agreement and this amount will be used by the Promoter to repay £200,000 of the Capital Introduced and £200,000 of the Prior Profit Allocation or such proportions thereof if the profit received by Paul Christopher Harney from the Ashfield Grange project is less than £400,000.  Any shortfall in respect of the £400,000 will be made up from other sources by Paul Christopher Harney.

SIGNED on behalf of WAVELEY COMMERCIAL LIMITED 

………………………….      Director

………………………….      Director/Secretary

SIGNED by PETER COLIN BARNETT 

………………………….

SIGNED by PAUL CHRISTOPHER HARNEY 

………………………….