Case No: HC-2015-002163
HC-2015-002636
Neutral Citation Number: [2018] EWHC 2163 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (Ch D)

Rolls Building, Royal Courts of Justice
Fetter Lane, London EC4A 1NL 

Date: 9 October 2018

Before :

MR JUSTICE NUGEE

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Between :

	COURTWOOD HOLDINGS S.A.
(a company registered and incorporated under
the laws of Panama)	

Claimant	
	
- and -		
	
(1) WOODLEY PROPERTIES LIMITED
(a company registered and incorporated under
the laws of Jersey)
(2) DOUGLAS MAGGS
(3) The Honourable CHARLES GEORGE YULE
BALFOUR
(4) The Right Honourable DAVID MELLOR
(5) SVEA BALFOUR
(6) WHARF LAND INVESTMENTS LIMITED
(in Administration)
(7) NIGHT RHYTHM LIMITED
(a company registered and incorporated under
the laws of Gibraltar)
(8) TAMADOT CAPITAL SA
(a company registered and incorporated under
the laws of Nevis)
(9) KINGFISHER HOLDINGS LIMITED
(a company registered and incorporated under
the laws of Nevis)
(10) WOODCOCK LIMITED
(a company registered and incorporated under
the laws of Gibraltar)
(11) CHARLESTOWN MANAGEMENT
LIMITED
(a company registered and incorporated under
the laws of Nevis)
(12) CHATEAU MANAGEMENT LIMITED
(a company registered and incorporated under
the laws of Nevis)

Defendants	

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Mark Cunningham QC and Gregory Banner QC (instructed by Wallace LLP) 
for the Claimant
Brie Stevens-Hoare QC and Sarah Clarke (instructed by CMS Cameron McKenna LLP)
for the 1st, 4th, 8th, 11th and 12th Defendants
Tom Beasley (instructed on a public access basis) for the 3rd Defendant
Thomas Robinson (instructed by Isadore Goldman) for the 5th, 9th and 10th Defendants

Hearing dates: 1, 2, 5, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20 and 28 March 2018

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Judgment
Mr Justice Nugee:
Introduction
1.	 	This action is a second round of litigation in relation to a development site known as Sandford Farm, Berkshire (“Sandford Farm”).  Sandford Farm was acquired in 2005 in the name of a Jersey company called Sandford Farm Properties Ltd (“SFPL”).  SFPL was a single purpose vehicle or SPV funded in part by bank borrowing and in part by a number of investors, the aim being to improve the planning position and sell the land for a profit.  This project was put together by the 2nd Defendant, Mr Douglas Maggs, who had a background in property, and who used the 6th Defendant, Wharf Land Investments Ltd (“Wharf”), a company of which he was in 2005 the sole director, to manage a number of development projects.  At Sandford Farm the plan was that Wharf would provide the expertise to enable SFPL to obtain planning permission and in return would receive 50% of the profits, the other 50% going to the investors.  The 4th Defendant, the Rt Hon David Mellor PC QC (the well-known former Cabinet Minister), had an interest in this because he and Mr Maggs were equal 50% owners of Wharf.  The 3rd Defendant, the Hon Charles Balfour, also had an interest: he had been asked by Mr Maggs to find investors for the project, and was to be rewarded by a share of Wharf’s share of the profits.   
2.		It was initially hoped this would be quite a short-term project, but in the event no improved planning permission had been obtained by 2009 when, in circumstances that I will come to, SFPL’s bankers, Abbey National Treasury Services plc (“Abbey”), called in its loan and appointed receivers (“the Receivers”).  The Receivers sold Sandford Farm to the 1st Defendant Woodley Properties Ltd (“Woodley”), another Jersey company, for £15m, a price that meant that the bank was repaid but the investors lost all their money.  Woodley was a newly-incorporated SPV put together by Messrs Maggs, Balfour and Mellor and owned (through offshore companies) by Messrs Maggs and Mellor and the 5th Defendant, Mrs Svea Balfour (Mr Balfour’s wife, now separated from him (they separated in 2013)).  Woodley succeeded in obtaining residential planning permission and subsequently sold Sandford Farm to Taylor Wimpey for £27m and substantial further overage, thereby realising a significant profit.  The essential complaint in these proceedings (put simply) is that the profits from Sandford Farm which should have belonged to SFPL, and hence the investors, have ended up instead in the hands of those who were supposed to be managing the project for SFPL.
3.	 	In the first round of litigation Ms Vivien Rose (as she then was), sitting as a Deputy High Court Judge, held that one of the investors, Mr Pavel Lisitsin, who had invested £2m in SFPL through his company Ludsin Overseas Ltd (“Ludsin”), had been induced to do so by fraudulent misrepresentation: her judgment (Ludsin Overseas Ltd v Eco3 Capital Ltd [2012] EWHC 1980 (Ch)), which was subsequently upheld on appeal (see at [2013] EWCA Civ 413), gives a detailed background to the project.  I will call these “the Ludsin proceedings”.   
4.	 	This second action is brought by Courtwood Holdings SA (“Courtwood”), a Panamanian company which is a corporate vehicle for another of the investors, Mr Giovanni Capodilista.  It sues as assignee from SFPL (which is in liquidation).  Its claim is to recover the profits made by Woodley from the sale of Sandford Farm, and to trace and recover the monies representing the proceeds of sale and overage from the other defendants.  The claim is that Woodley received Sandford Farm with knowledge of a breach of fiduciary duty such as to make it liable as a constructive trustee on the grounds of knowing receipt; and that the other defendants are liable as constructive trustees on the grounds that they received monies derived from the sale of Sandford Farm, again with sufficient knowledge of a breach of fiduciary duty to make them liable on the grounds of knowing receipt.  
5.	 	The claims in knowing receipt are the only pleaded claims that I am concerned with.  There was originally a pleaded claim for breach of fiduciary duty against Wharf, but Wharf was already in administration before these proceedings commenced and the Particulars of Claim made it clear that no financial relief was sought against Wharf but only a declaration that it procured the disposal of the land at Sandford Farm to Woodley in breach of its fiduciary duties to SFPL; I was told that Wharf is now in liquidation and as I understand it even this limited relief is not now being pursued.  At any rate it has not been suggested to me that any application has been made to lift the stay imposed by s. 130(2) of the Insolvency Act 1986.
6.		There are four individual defendants who are sought to be made liable for knowing receipt, namely Mr Maggs, Mr Mellor, Mr Balfour and Mrs Balfour.  The other defendants to this claim are corporate entities, all incorporated in offshore jurisdictions, which are said to be associated with one or other of the individual defendants, and to have been used to receive some of the profits.  
7.	 	Not all the defendants took an active part in the trial.  The position at trial was that there were three separate groups of defendants represented, as follows:
(1)	 	Mr Mellor, together with Woodley and three Nevis companies said to be associated with him – the 8th Defendant Tamadot Capital SA (“Tamadot”), the 11th Defendant Charlestown Management Ltd (“Charlestown”), and the 12th Defendant Chateau Management Ltd (“Chateau”) – were represented by Ms Brie Stevens-Hoare QC and Ms Sarah Clarke.  I will refer to these defendants as “the Mellor defendants” (Ms Stevens-Hoare said that they preferred to call themselves “the CMS defendants” but I do not think the label is of any significance – it is not intended to prejudge any of the issues).  
(2)	 	Mrs Balfour, together with two companies associated with her – the 9th Defendant Kingfisher Holdings Ltd (“Kingfisher”), a Nevis company; and the 10th Defendant Woodcock Ltd (“Woodcock”), a Gibraltar company – were represented by Mr Thomas Robinson.  (Mr Robinson told me that Kingfisher is in fact now dissolved, but continues in existence for the purpose of these proceedings). 
(3)	 	Mr Balfour was represented by Mr Tom Beasley.
The other defendants were not represented.  Wharf, as I have said, is now in liquidation and the proceedings against it are no doubt stayed.  Mr Maggs is bankrupt.  Neither he nor the 7th Defendant Night Rhythm Ltd (“Night Rhythm”), a Gibraltar company associated with him, served a defence and at a Case Management Conference on 22 November 2016, the Chancellor ordered that he and Night Rhythm be debarred from defending the claim as to liability, and that Courtwood’s applications against them for judgment on liability and consequential relief in default of them having served defences should be adjourned to the hearing of the trial.  
8.	 	As I said in a judgment which I delivered on Day 1 of the trial, there are in effect four building blocks in Courtwood’s case.  The first is that Wharf owed SFPL a fiduciary duty.  SFPL, which had no personnel of its own other than professional directors in Jersey, signed an agreement with Wharf called a Property Advisory Agreement (“the PAA”) which provided for Wharf to advise SFPL in relation to the planning permission, development and sale of Sandford Farm in return for its fee of (effectively) half the profits of the project.  This appears to have been a model which Mr Maggs had used for other property ventures, some of which were successful and some not.  Wharf is said to have owed SFPL a fiduciary duty either as a result of the express terms of the PAA, or from the way in which Wharf in fact ran SFPL’s business almost entirely itself, the Jersey directors playing no more than a formal role in the business. 
9.	 	The second building block is that Wharf acted in breach of that fiduciary duty.  I will have to look at the details of what is alleged in due course but in summary the allegation is that it entered into a scheme to bring about the demise of SFPL by making it effectively insolvent, causing the Receivers to be appointed and procuring the Receivers to sell Sandford Farm to Woodley.      
10.	 	The third building block is that the defendants received Sandford Farm or the proceeds of its sale as a result of Wharf’s breach of fiduciary duty.  There is an issue as to whether SFPL had any traceable property in Sandford Farm at the time of the sale to Woodley, which I explain below, but subject to that it is not disputed that Woodley received Sandford Farm, and subsequently the proceeds of its sale to Taylor Wimpey.  It is also not disputed that some of the proceeds of that sale have been distributed to, and received by, certain of the defendants: in particular Mr Mellor accepts that he has received, or can for the purposes of these proceedings be regarded as receiving, certain sums, and Mrs Balfour accepts that she, or companies associated with her, have done so.  Mr Balfour however denies receiving anything.  A substantial amount of the overage has been frozen pending this trial by a proprietary injunction restraining Woodley from dealing with it, initially granted by Hildyard J and continued by Asplin J.
11.	 	The fourth building block in Courtwood’s case is that each of the defendants who has received anything had sufficient knowledge of Wharf’s breaches of fiduciary duty to make the recipient accountable as constructive trustee on the ground of knowing receipt.  It is common ground that that requires the relevant defendant to have such knowledge as to make it unconscionable for him, her or it to retain the relevant property; see BCCI (Overseas) Ltd v Akindele [2001] Ch 437.  
12.	 	That statement of the four building blocks required to establish Courtwood’s claim conceals a point which is said by the defendants to be an essential element in the claim for knowing receipt.  What is said by the defendants, primarily on the strength of the Court of Appeal decision in Brown v Bennett [1999] 1 BCLC 649, is that it is not enough to establish that there is a breach of fiduciary duty which has led to the defendants receiving SFPL’s property; what is needed is that the receipt should be the “direct result” of the breach of trust or fiduciary duty, and that means, it is said, that the very disposition of SFPL’s property should itself be a breach of trust or breach of fiduciary duty.  Since the Receivers are not alleged to have acted in breach of duty when they sold Sandford Farm to Woodley, the defendants’ case is that that cannot be made out even if all Courtwood’s other allegations are established.
13.	 	On my initial reading of the case I was indeed doubtful if Brown v Bennett could be distinguished from the alleged facts in this case; and, if it could not, whether any useful purpose would be served in proceeding with a 3-week trial in circumstances where the claims would fall be to be dismissed whatever the evidence.  I therefore gave counsel as much notice as I could that I would like them to address this point in their openings on Day 1, 1 March.  Having heard such argument as was then put forward I came to the view that Mr Mark Cunningham QC, who appeared with Mr Gregory Banner QC for Courtwood, had failed to persuade me that there was any relevant factual distinction, and gave an unreserved judgment dismissing the action.  The next day however Mr Cunningham asked me to withdraw my judgment under the jurisdiction confirmed by the Supreme Court in re L (Children) [2013] UKSC 8 (no order having yet been drawn up and sealed), presenting rather fuller reasons why Brown v Bennett should be distinguished.  I admit to some doubt whether the re L jurisdiction was intended to allow parties who have lost an action or application routinely to have a second go at persuading the judge simply because they have thought of further and better arguments, but I accepted that I not only had jurisdiction to withdraw my judgment but should exercise it if I thought there was any real doubt about the matter, and although not then persuaded that the judgment I had delivered the previous day was wrong, I accepted that Mr Cunningham had raised sufficient doubts to make it preferable for there to be a trial after all, and withdrew my judgment of 1 March.  That meant that the trial continued and the Brown v Bennett point remains a live one.  
14.	  The issues can therefore be summarised as follows: (i) did Wharf owe SFPL fiduciary duties? (ii) did Wharf act in breach of those fiduciary duties? (iii) was any property traceable as representing SFPL’s property? (iv) was any receipt by the defendants the direct result of the breach of fiduciary duty so as to satisfy the requirement in Brown v Bennett?  (v) if so, what (if anything) did each defendant receive? and (vi) if so, did each defendant who received anything do so with sufficient knowledge of the breach of duty?  This is a rather shorter list than the list of issues produced by the parties (which was not wholly agreed) but will I think suffice for present purposes.
The witnesses
15.	 	Courtwood called the following witnesses:
Mr Pavel Lisitsin: Mr Lisitsin is a former Russian oil trader, now a British citizen.  He was the largest single investor in SFPL, putting in £2m of the £5.25m raised from investors through his company Ludsin.  He has already been successful in recovering his £2m through the Ludsin proceedings, and Ms Rose’s judgment gives considerably more detail about his background.  He is not a party to these proceedings and does not stand to gain anything from them, having had enough, as he explained in his witness statement, of litigation.  His English is very good and he gave evidence in English.  His cross-examination was an unusually slow process because he took time to read thoroughly documents put to him in cross-examination, and answered questions quite carefully, but I did not get the impression that he was trying to hide anything.  Rather, he was trying to be precise in his answers, seeking to distinguish between what he then knew and what he now thought.  Overall I agree with the assessment of him made by Ms Rose in the Ludsin proceedings, who found him a straightforward and helpful witness (at [53]).  
Mr Mark Turner: Mr Turner was employed as a Senior Planning Officer by Wokingham Borough Council, the local planning authority for Sandford Farm, between 2007 and 2013.  Although not personally dealing with the planning application for Sandford Farm, Mr Turner knew those who were, and was able to give some limited factual evidence as well as more general background evidence.  He gave his evidence in a frank and helpful way.  
Mr Giovanni Capodilista:  Mr Capodilista is an Italian who describes his professional background as being in banking, fund management and financial advisory work.  He was another significant investor in the project, investing £500,000.  As already explained he is the individual who is behind these proceedings, Courtwood being his vehicle.  He gave evidence in English and again his English is very good.  He gave his evidence in a clear, precise and straightforward manner and I have no reason to think he was doing anything other than seeking to assist the Court.  On occasion he admitted to forgetting certain details – he is now in his 70s – and he seemed to me to become tired, and his evidence less precise, towards the end of each of the two days on which he was cross-examined but on the whole he gave clear and credible explanations of the essential points as he saw them.  It was suggested to him that he had regularly indulged in speculation without any foundation, but I think this was an unfair criticism; he was in general careful to distinguish between what he knew and what he did not, and whether he had seen something at the time or had discovered it later, and to identify matters that were based on rumour or speculation rather than anything firmer.  Overall I found him another straightforward and helpful witness.
Mr Alexander Bligh: Mr Bligh was approached on behalf of certain shareholders to act as investor representative on the board of SFPL and was closely involved with events from late April 2009 until the appointment of the Receivers in June 2009.  He came across as a businesslike and straightforward witness.
16.	 	In addition to these witnesses, Courtwood served a hearsay notice in relation to a number of documents containing statements made by Mr Maggs.  These consist of three transcripts of evidence given by Mr Maggs and two witness statements made by him in other proceedings, as well as extracts from his electronic calendars.  The other proceedings came about as follows.  SFPL was put into liquidation in Jersey by a special resolution of the members on 21 April 2010, and a Mr David Rubin appointed liquidator.  Mr Rubin in due course asked the Royal Court in Jersey to request the assistance of the High Court in England and in 2012 Mr Peter Leaver QC (sitting as a Deputy High Court Judge) made an order requiring Mr Maggs to attend an oral examination under s. 236 of the Insolvency Act 1986.  That took place over 3 days in February, June and November 2014 and the transcripts are transcripts of that examination.  The two witness statements were made in opposition to further applications and gave some more evidence as to Mr Maggs’ interest in Woodley and what had happened to it.  Although Mr Cunningham relied on only a small part of this material, it is common ground (i) that by putting the documents in, he has adduced in evidence all the statements contained in them; (ii) that the effect of the Civil Evidence Act 1995 is that they are all admissible as hearsay evidence of the truth of the matters stated (although the weight to be attributed to them is another matter); and (iii) that once the statements are in evidence, they are evidence for all parties and for all purposes.    
17.	 	Mr Mellor gave evidence (on behalf of himself and the other defendants jointly represented with him), and also called the following witnesses:
Mr Geoffrey Leary: Mr Leary was formerly the Chief Executive of Dr Solomon’s Group plc which produced anti-virus software, and made a significant amount of  money when the company was sold after a management buyout which he and two fellow-directors (Mr David Stephens and Mr Keith Perrett) had participated in.  The three of them thereafter invested together in a number of projects, including Sandford Farm where each put in £250,000.  He was in general a straightforward witness who was trying to assist the Court, although it became apparent that he did not always understand why the draft of his witness statement prepared for him had been phrased in the way it was.  
Mr Charles Barda: Mr Barda is a chartered surveyor and was employed by Wharf as a development manager, reporting to Mr Mike Murray, the head of development.  He gave evidence about his work on the Sandford Farm project.  His evidence on this was sensible and factual.  Despite facing some difficult questioning, in general he acquitted himself well, although like Mr Leary, his witness statement had been drafted for him and he could not always explain the phrases used in it.  Overall however he was a helpful witness.    
Mrs Julie (or Lee) Welsh: Mrs Welsh is a director of Chateau Fiduciaire SA, a provider of fiduciary services based in Geneva.  She is also a director of Woodley and Chateau and the President of Tamadot.  Her evidence was limited to the period after November 2011 and so directed at the dealings with the proceeds of sale.  She gave the impression of being professional and competent in her dealings, and I have no reason to think that she was seeking to do anything other than assist the Court.  However there were a number of questions she was unable or unwilling to answer because of her understanding of Swiss secrecy laws, which rather hampered the helpfulness of her evidence.  
Mr Stephen Hamilton: Mr Hamilton was the Head of Corporate Restructuring at Abbey.  He took over responsibility for the SFPL loan at the end of May / beginning of June 2009.  He was not able to give evidence as to the prior events but he gave evidence as to the appointment of the Receivers.  He was an entirely straightforward and helpful witness.
As to Mr Mellor himself, he is a well-known public figure.  He was MP for Putney from 1979 (at the age of 30) to 1997 and a Minister from 1981.  Since leaving politics in 1997 he has had a varied career which includes being a business executive and corporate adviser.  He came across as intelligent, confident, very conscious of his own abilities, and assertive if not combative.  He initially treated his cross-examination as an opportunity to engage in verbal jousting with Mr Cunningham, but after I reminded him that the purpose of the exercise was not to argue with counsel or score points, but to give me the benefit of his evidence, he rather calmed down.  But he still had a tendency to use his answers to argue his case rather than simply provide his recollection, and I have approached his evidence with a degree of caution as a result.
18.	 	Mr Balfour gave evidence himself but did not call any other witnesses.  He was at a severe disadvantage because of findings made against him by Ms Rose in the Ludsin proceedings in which she not only disbelieved his written and oral evidence but also found him to have acted dishonestly.  He did not seek in these proceedings to go behind any of those findings.  In the light of that I treat his evidence with some caution.    
19.		Mrs Balfour gave evidence herself and called one other witness:
Mr Andrew Haynes: Mr Haynes is a Gibraltar barrister who in addition to his legal practice has an associated business managing companies, and in that capacity was responsible for incorporating Woodcock and providing its sole director (a company called A&H Nominees Ltd of which Mr Haynes is a director).  He was an entirely professional and straightforward witness.
As to Mrs Balfour herself, she lived up to Mr Balfour’s description of her as a strong and highly independent woman with her own views, distinct from her husband, and often firmly expressed.  I found her a credible witness.
20.	 	I should record that I heard some expert evidence on the value of Sandford Farm at the time of the sale to the Receivers.  This is not a question which has any direct bearing on any of the issues in the case (it was suggested it might have an indirect bearing) and I do not find it necessary to resolve it.  In those circumstances, with all respect to the expert witnesses who considered the question at some length in their reports and were cross-examined in detail on them, I do not think any useful purpose would be served by my assessing their evidence or resolving the differences between them and I propose to say no more about it.
The facts 
21.	 	I give here a summary of the facts without at this stage seeking to resolve some of the more contentious issues.
Background
22.	 	Sandford Farm consisted of a freehold property of some 114 acres (46 hectares) on the eastern edge of Woodley in Berkshire, a satellite town of Reading about 5 miles east of Reading town centre.  It was bounded to the west by the site of the former Woodley Aerodrome which had since been developed in the 1980s and 1990s for residential use, but the surrounding area on the other three sides was predominantly open countryside.  A river, called the Old River Loddon, ran through it, bisecting the land from north to south; only the part of the property to the west of the Old River was regarded as developable, the part to the east being an area of grassland, woodland and lakes that formed an undevelopable flood plain.  The western developable part, amounting to about 50 acres, had been used for gravel extraction from the early 1970s and from the late 1970s was, as was then customary, backfilled as a landfill site with waste material and then grassed over.  This gave rise to a number of problems: the waste was not highly contaminated, but the main environmental risk was methane gas production; and the waste was also poorly compacted which meant that without further action the levels of the site would fall as the waste degraded and settled.  Sandford Farm had been acquired by Hicks Persimmon Ltd (“HPL”) in about 1995.
23.	 	The planning position in 2005 was as follows (this is largely taken from a valuation carried out by Colliers CRE in August 2005 for Wharf, together with a planning potential report by Colliers CRE in September 2007 for Abbey):
(1)	 	The local planning authority was Wokingham District Council (“the Council”).
(2)	 	In 1998 HPL applied for planning permission for remediation of the land and its development for up to 450 dwellings.  The proposal required the removal of a large amount of hazardous and non-hazardous waste.  There was local opposition from the residents of Woodley and Hurst (a village to the east of Sandford Farm) who formed a campaign under the banner “Loddon Valley Action”.  The application for residential development was refused by the Council, and an appeal was dismissed in August 1999 by the Secretary of State, accepting a recommendation to that effect from an inspector who had held a public inquiry.
(3)	 	In 1999 The Oracle Corporation applied for planning permission to develop the site for a Training Centre, with 200,000 sq ft of Training Accommodation, a 40,000 sq ft Health and Fitness Facility and a 100 bedroom hotel (“the Oracle scheme”).  Outline planning permission for the Oracle scheme was granted by the Council in July 2002.  This required reserved matters to be submitted by July 2005, a time limit that was later extended to July 2008.
(4)	 	In June 2003 HPL applied for planning permission for a residential scheme.  This also aroused opposition from the Loddon Valley Action Group; the local MPs (for Reading East and Maidenhead) were opposed to the scheme; and a petition and many letters opposing the proposals were received by the Council.  HPL withdrew the application in October 2004.  
(5)	 	The Council had adopted a Development Plan in 2004.  This included five sites as reserve sites for residential development, one of which was Sandford Farm.  I heard some evidence from Mr Turner as to the effect of a site being a “reserve site” but since he was not purporting to give expert evidence and nothing I think turns on it, I do not need to go into it in any detail.  The general effect was that being a reserve site did not by itself mean that the Council would grant planning permission for residential development unless it was “released” for housing (which in the event the Sandford Farm site was in 2007); but that even before release the fact that it was a reserve site might make it more likely that residential planning permission would be obtained if the Council was short of sites to fulfil its five-year rolling requirement for housing.  That requirement however only seems to have come into effect in April 2007 and at the time of their valuation in 2005 Colliers CRE said that they understood from guidance adopted by the Council called Housing Land Delivery Supplementary Planning Guidance B7 that sufficient land was ear marked for development and that consequently no further land needed to be released, and that “even if there were a housing need this could be met from other reserve sites.”  (This appears to have been a quotation from the planning officer’s report in June 2005 on the application to extend the life of the Oracle scheme consent).
(6)	 	Colliers CRE had been provided in 2005 with a proposed scheme for development of the site for warehousing (c 540,000 sq ft) and a health and fitness unit (c 40,000 sq ft) (“the warehousing scheme”).  They concluded that the proposed development was appropriate and valued the land at £12.5m with the benefit of the extant planning permission for the Oracle scheme, and at £18m on the assumption that planning permission was granted for the warehousing scheme.  
24.		Wharf had been set up by Mr Maggs and Mr Mellor in March 2003.  They had known each other since 1993 when Mr Mellor was acting as business advisor to a Mr Ching-Kwan Ma and Mr Maggs was Mr Ma’s director of property, mainly based in Hong Kong.  When Mr Maggs returned to the UK to set up his own property business, he asked Mr Mellor to act as an adviser to the business and eventually in 2003 they set up Wharf together.  Although they were equal shareholders, it was initially very much run by Mr Maggs as sole director – he was described by Mr Mellor as taking executive control of the company, by Mr Leary as having the Chief Operating Officer role, and by Mr Balfour as the driving force behind the company – but Mr Balfour became a director in February 2006 and Mr Mellor in July 2007.  Mr Mellor’s description of Wharf’s business was that it had been set up to act as a property manager, with the object in simple terms of identifying land with development opportunities, facilitating the purchase of the land by an SPV owned by investors, realising the development potential through planning permission and then facilitating a sale. 
Introduction of investors
25.	 	It appears that a Mr Simon Holley introduced Mr Maggs to the site at Sandford Farm.  Mr Maggs approached Mr Balfour with a view to raising money from investors.  Mr Balfour and his wife had met Mr Maggs earlier in 2005 through a mutual friend.  He had no prior experience of property development, but he did have over 20 years’ experience in merchant banking and finance (he was then working at Fleming Family and Partners) and Mr Maggs hoped he could use his contacts and experience to bring in investors.  By 1 July 2005 a Transaction Note had been prepared for Mr Balfour.  This indicated that it was unlikely that housing development could be brought forward in the foreseeable future due to environmental considerations but that the Council was keen to see the future of the site resolved; it suggested that the warehousing scheme might produce a site value of £27m.  It envisaged a purchase of the site in August 2005, planning consent in October/November 2005, and a sale in January or February 2006.  
26.	 	Mr Balfour introduced a number of investors to the Sandford Farm opportunity.  These included the following:
(1)	 	Mr James Adeane
Mr Adeane was a friend of Mr Balfour’s for whom he acted as a trustee (and Mr Adeane appears to have himself been a trustee for Mr Balfour’s mother).
(2)	 	Mr Capodilista
Mr Capodilista’s wife Madelaine had been a friend of Mrs Balfour’s for a number of years, and Mr Capodilista had known Mr Balfour socially since the early 1990s.  Some years later they had become good friends; for example the two families went to Sardinia on holiday together in the summer of 2005.  
(3)	 	Dr Alexander Shadrin 
Dr Shadrin was a director of Eco3 Capital Ltd (“Eco3”), which he described to Ms Rose in the Ludsin proceedings as an independent venture capital firm focusing on investments in the energy sector; Mr Balfour had met him in 2004 and worked intensively (on behalf of Flemings) with him and Eco3 on a complex venture capital project concerning licences to exploit oil fields in Siberia through a company called Continental Petroleum Ltd (“CPL”), a venture which Mr Capodilista had also been persuaded to invest in.  
(4)	 	Mrs Balfour
Mr Balfour did not invest in the project himself.  He explained in his witness statement that at one stage he thought he might but he was not in a financial position to do so.  But his wife, who is independently wealthy due to inherited wealth from her family, did invest.  Mr Balfour told her that the project looked interesting and would need outside finance and suggested she might invest; she also met Mr Mellor who thought it was a good investment.  She was initially interested in an investment of £500,000 but when it came to it was told that the project was oversubscribed and she could only put in £112,500, which she did through a settlement she had recently set up called the Oakley Settlement.
There was another investor, a Mr Bruce Jelly, who was regarded by Mr Balfour as one of “his” investors, although he did not know him and did not introduce him. 
27.	 	Dr Shadrin in turn introduced the Sandford Farm opportunity to Mr Lisitsin, whom he had met in around 2003 as they were both involved in the governance of a Russian orthodox church in Chiswick: a detailed account of Dr Shadrin’s approach to Mr Lisitsin and their dealings is given in Ms Rose’s judgment in the Ludsin proceedings. 
28.	 	In the end a total of £5.25m was raised from investors.  A table prepared in November 2005 gives the investors as follows (with comments added by me): 
29.	
Investor	Amount £	(Comments)	
Eco3 Tranche 1	2,500,000	£2m from Mr Lisitsin
£300,000 from Dr Shadrin himself
£200,000 from a colleague of Dr Shadrin	
James Adeane	   500,000		
Anglo Irish Bank Suisse SA	500,000	(Mr Capodilista)	
Stephen Hopkins	137,500		
Bayside Associates	250,000	(Alistair Clayton) 	
Narrowsburg Holding Ltd	250,000	(David Lenigas)
Mr Clayton and Mr Lenigas were two Australian mining investors	
Forsters (Musketeers Sandford Farm Nominees) Ltd 	750,000	£250,000 from each of Mr Stephens, Mr Perrett and Mr Leary	
Bruce Jelly	250,000		
Oakley Settlement	112,500	(Mrs Balfour)	
Total	5,250,000		

Structure for purchase – the back-to-back sales and payments from the differential
30.	 	SFPL did not purchase the land directly from HPL.  Instead the land was the subject of two “back-to-back” sales which were completed simultaneously, a first sale from HPL to a company called Bound Oak Properties Ltd (“Bound Oak”) at a price of £9.3m, and a second sale from Bound Oak at a price of £12.25m, the contract of sale being initially with an entity called Sandford Farm LLP but in the event being completed in favour of SFPL.  These events,  and the “turn” or differential in price of almost £3m, were examined in detail in the Ludsin proceedings, as the claim there was based on the fact that Dr Shadrin, who knew about the “two-tier structure” (as Ms Rose referred to the back-to-back sales), never told Mr Lisitsin about it, and indeed was found by Ms Rose to have made a misrepresentation to him that the owner of the site was selling the land for £12.25m.
31.	 	These matters do not form part of the present trial and it is not necessary to go into them in detail but I should give some account of the structure used for the acquisition of the site.  I can do so by reference to the facts found by Ms Rose in the Ludsin proceedings and recounted in her judgment as follows (references in square brackets are to paragraphs of her judgment):
(1)	 	The purchase was funded in part by the money raised from investors, and in part by a bank loan of £7.5m from Investec Bank UK Ltd (“Investec”) [17].  (In fact the amounts drawn down from Investec appear to have been rather larger than this: see below).  
(2)		By a contract dated 12 October 2005 HPL (and a number of other parties, effectively the Coff family who owned a ransom strip) contracted to sell Sandford Farm to Bound Oak for £9.3m, with completion due on 9 November 2005.  Bound Oak was set up as a shell company by Forsters (a firm of solicitors that had worked with Mr Maggs and Wharf on a number of transactions); by 19 August 2005 it was jointly owned by Mr Balfour (who had acquired Mr Maggs’ share) and a Mr Bell, a colleague of Mr Maggs.  Mr Maggs was a director of Bound Oak from the start and Mr Balfour a director from 3 October 2005 [19].
(3)	 	By a second contract also dated 12 October 2005 Bound Oak contracted to sell Sandford Farm to a UK limited liability partnership (or LLP) called Sandford Farm LLP at the price of £12.25m (plus VAT) [20].  The completion date for that contract was again 9 November 2005.
(4)	 	On 2 November 2005 Sandford Farm LLP was replaced as the counterparty in the second sale by SFPL (which had been incorporated in Jersey on 21 October 2005).  It had always been intended to use an offshore vehicle for tax reasons but SFPL could not be set up in time due to the need to comply with Jersey money laundering obligations [22].
(5)	 	Both contracts were completed on 9 November 2005 [24].
32.	 	Ms Rose also made detailed findings about what happened to the differential.  A small part, £25,000, was used as a contribution to the payments required by the Coff family (a much larger payment, of over £5m, was made by HPL out of the £9.3m paid to HPL by Bound Oak) [103].  The balance was distributed as follows: two payments totalling £1.125m were made to a company called L&H Estate Management Acquisition, a vehicle of Mr Maggs (in fact I think L&H Estate Management and Acquisitions (“L&H”), which was not a separate corporate entity but simply a trading name for Mr Maggs); £587,500 (that is £500,000 plus VAT at 17½%), described as for “Consultancy Services”,  was paid to Mr Mellor trading as DM Consultancy; £587,500, described as “fee relating to sale”, to Mr Holley; £125,000, described as “commission”, was paid to Eco3; and £500,000 was paid to Catchphrase Holdings Ltd (“Catchphrase”) [104]-[105].  Before Ms Rose, Mr Balfour maintained that the payment to Catchphrase was not a payment to him but to his wife’s trust fund in return for its help [138]; but Ms Rose, who was unimpressed with Mr Balfour as a witness and who described his evidence on this point as “entirely incredible”, said that she had no doubt that it was Mr Balfour’s share of the differential [141].  In these proceedings, Mr Balfour accepted that he was bound by the findings of fact in the Ludsin proceedings and expressly accepted that Catchphrase was his corporate vehicle.  
33.	 	I am very doubtful if this distribution of the differential was disclosed to the investors.  Taking Mr Capodilista as an example, the evidence before me suggests that he was only sent the following documents:
(1)	  	On 3 July 2005 Mr Balfour forwarded to him the Transaction Note he had received on 1 July.  This referred to a proposed acquisition of the land by way of purchasing the shares in an SPV for £11.25m and said nothing about the two-tier structure.  
(2)	 	On 25 August 2005 Ms Alexandra Tadman of Wharf sent Mr Capodilista a package of information.  This included a copy of the Colliers CRE valuation, and a further Transaction Note.  The latter did refer to a proposed two-stage transaction, the two stages at that point being (i) the purchase of the shareholding of an SPV which owned the site for £9.5m and (ii) the transfer of the site to a development company for £12.25m, this being said to be something that would “facilitate the settlement of external interests and purchase costs”.  Neither this Transaction Note however, nor any other document sent to Mr Capodilista that I have seen, explained that the investors would only come in at the second stage of the transaction, and that the turn or differential would in fact be used to benefit Mr Maggs, Mr Balfour and Mr Mellor (together with Mr Holley and Dr Shadrin).      
(3)	   	On 12 September 2005 Mr Maggs sent Mr Capodilista a letter which said that the property was being purchased within a UK LLP, but would be completed in a Jersey SPV; that the Jersey SPV would have entered into an asset / property management agreement with Wharf; and that Wharf would apply for one or more planning consents following which the property would be sold and the profits distributed between the investors and asset managers, the headlines being that the investors receive a priority return of 24%, the asset managers then catch up to an equal sum and the remaining surpluses be shared equally.  It added:
“The asset managers will make no charge for their services during the course of the planning, purchase and asset disposal.”
It said nothing about the two-tier nature of the purchase.
(4)	 	On 3 October 2005 Mr Maggs sent Mr Capodilista a letter confirming the arrangements for his investment.  This said a number of things.  In relation to the acquisition it simply said that: 
“Contracts have been exchanged for the purchase of the property at £12.5m.”  
It also described Wharf’s involvement as follows: 
“The property is to be managed by Wharf Land Investments Limited.  Wharf and the investors will each earn 50% of any profits from the project, subject to a minimum return to the investors of a 24% IRR on their total debt and equity invested.  Wharf has agreed to provide the funds needed to apply for planning permission by way of interest free loan.”  
It also said that Mr Capodilista’s investment would either go into Sandford Farm LLP or into a Jersey company then being formed, and under the heading “Outline Jersey Company Structure” there were the following among other provisions:
“(c) business of the company to be limited to applying for planning permission for Phase 1 of the site.  Any change to the planning permissions initially approved is to require 75% investor approval. 
...
(e) no borrowing save from investors as summarised above or from Wharf Land Investments Limited, the asset manager, interest free, to finance the planning application. 
(f) no dealings between the company and any one connected with any shareholders or the asset managers save as set out in the articles, any shareholder agreement, and the asset management agreement.” 
(5)	 	On 13 October Mr Balfour sent Mr Capodilista an e-mail which appears to have contained the same text as Mr Maggs’ letter.
(6)	 	There were various further communications dealing with such matters as money laundering checks, but none of them dealt with the substance of the purchase of the land, or the arrangements with Wharf.
34.		None of these communications therefore informed Mr Capodilista that the two-tier structure was being proposed to enable Mr Maggs and others to benefit from the differential.  The evidence before Ms Rose was that a Transaction Note in the same terms as that of 25 August was sent to other potential investors who were contacts of Mr Maggs and Wharf [201].  In these proceedings Mr Leary, who was called by the Mellor defendants, gave evidence that because of the Transaction Note he was provided with he was aware of “the turn” and that Mr Maggs and his associates “were extracting £2M/£3M to cover costs and fees for the work so far”.  Mr Leary was however unable either to be sure which of the various iterations of Transaction Note he had actually seen (although he thought the one sent to Mr Capodilista looked like the one he had seen); or, more significantly, to explain how he had come to say that he was aware from it that Mr Maggs and his associates were extracting £2-3m when none of the versions in evidence said anything of the sort. 
35.	 	What is clear is that Mr Eadie of Forsters had given forthright advice to Mr Maggs and Mr Balfour on 18 August that on general principles disclosure needed to be made to the investors of the mark-up between the first and second purchases, and that to the extent that amounts were paid to either of them or to Dr Shadrin (or entities designated by any of them) the investors needed to be informed of this as well.  The reaction from Mr Maggs, as reported to Mr Eadie by Mr Patterson (another solicitor at Forsters), was that he “seems to take umbrage at this note”.  Then on 29 September Mr Eadie sent Mr Balfour and Mr Maggs a draft of the letter to be sent to prospective investors which included the statement: “Contracts have been exchanged for purchase of the property at £12.25m.  The purchase is from Boundoak Property Limited, a company controlled by Douglas Maggs.”  As can be seen Mr Maggs omitted the latter part of this statement from the letter he in fact sent.  Ms Rose, who considered in some detail both the advice given by Mr Eadie, and the disclosures actually made to the investors (and also to Investec), concluded that none of the excuses put forward by Mr Maggs and Mr Balfour for their failure to heed the warnings repeatedly given by Mr Eadie that disclosure must be made to the investors stood up to any scrutiny and that “There appears to me to be no honest reason why Mr Maggs and Mr Balfour acted as they did.” [229]. 
36.	 	No relief is sought in relation to these matters in the present trial, and it is not necessary for me to reach any final conclusion on them.  But so far as Mr Maggs is concerned, it does seem on the face of it that he deliberately arranged matters so that of the £5.25m raised from investors, a very substantial proportion (£1.125m) found its way into his own pocket without the investors being told anything about it.  And so far as Mr Balfour is concerned, he accepted in these proceedings, as I have said, that he was bound by the findings in the Ludsin proceedings, including findings of dishonesty.  
37.		So far as the payment of £½m plus VAT to Mr Mellor is concerned, he was neither a party to, nor called as a witness in, the Ludsin proceedings, and Ms Rose made no findings in relation to this payment, but in these proceedings he did give some evidence defending his receipt of it.  His account was that Mr Maggs and Mr Holley had approached the local Persimmon management but they were reluctant to sell so Mr Maggs had asked him to contact a more senior person in Persimmon; this he did, making a number of telephone calls to him and successfully persuading him to agree that the sale could proceed, in effect overruling the local management.  Mr Mellor described the fee as entirely reasonable, commenting that his efforts unlocked a development potential that in the end resulted in some £40m gross monies being made from the exploitation of the land, and hence that the fee ended up as some 1.25%.  That calculation seemed to me to rather overlook the fact that at the time it was paid no profit had been realised at all, nor any permission granted, and that even on the assumption of permission being granted for the warehousing scheme then contemplated, the uplift in value anticipated by Colliers CRE was much more modest, being from £12.5m to £18m.  The fee in fact represented over 5% of the true cost of the land (£9.3m) and nearly 10% of the total monies contributed by the investors.  
38.	 	Mr Mellor was also very vague about where he thought the money was coming from: he denied that it came from Wharf (although in fact it came from a client account of Forsters in the name of Wharf), but was unable to assist with who he thought was paying him.  As I understood his evidence, he did not enter into any form of contract entitling him to £½m or any specific level of fee at all – he was just asked by Mr Maggs to speak to Persimmon, made it clear that he would expect a fee if the land was released, and was later told by Mr Maggs that a fee could now be paid, Mr Maggs suggesting that £½m would be appropriate, and asking him to send an invoice to Forsters; Mr Mellor could not now find the invoice or remember to whom it was addressed, and did not know who Mr Maggs was acting for, but assumed that Mr Maggs had got together a group of investors who were in a position to meet his fee.  He said that the company involved was in fact Bound Oak but that was a company in which he had no involvement.  (I am far from sure about this last point: Forsters’ ledger for Bound Oak appears to show a receipt from Mr Mellor of £9,400 as its opening credit in October 2005, although Mr Mellor was not asked questions about this, and I cannot make any findings about it.)  But even taking Mr Mellor’s evidence all at face value, it seems a remarkably casual way to do £½m’s worth of business, and I am left with the suspicion that either Mr Maggs told him rather more about what he was doing and how the fee was going to be funded than Mr Mellor was prepared to admit (or than can now be established); or that he chose not to ask questions precisely because he did not want to know quite how Mr Maggs was going to get the money out of the investors.  On any view he was apparently willing to leave the fee both uncontractual and unspecified in amount, which suggests that he was happy to trust Mr Maggs to see that he was paid handsomely without having to negotiate with him, and that in turn suggests that he was well aware that Mr Maggs would not be driving a hard bargain in the interests of the investors.  But for the purposes of this action I need not, and do not, reach any conclusions on these matters.  All that I can, and do, conclude is that Mr Mellor in fact benefited to the tune of £½m from the £5.25m put up by the investors without, so far as the evidence before me shows, the investors knowing anything about it, far less approving the scale of his fee for what amounted to a handful of telephone calls.
Completion of the purchase
39.	  	The two contracts for sale, the first from HPL to Bound Oak at a price of £9.3m, and the second from Bound Oak to Sandford Farm LLP at £12.25m,  were exchanged on 12 October.  At the same time two further documents were executed.  The first was a Pre-emption Agreement between Bound Oak and another Persimmon company, Charles Church Developments Ltd (“Charles Church”), which prevented Bound Oak for 10 years from selling any part of Sandford Farm on which planning permission for residential development had been granted without giving Charles Church an option to purchase at market value.  It was expressed to bind Bound Oak’s successors in title other than a bona fide arms length mortgagee or chargee.  
40.	 	The other was an Undertaking, again made between Bound Oak and Charles Church by which Bound Oak undertook as follows:
“The Company irrevocably and unconditionally undertakes with the Beneficiary that during the Undertaking Period neither the Company nor (to the extent it is able to so procure) any Affiliate of the Company nor any other person on behalf of the Company nor (to the extent it is able to so procure) any person on behalf of any Affiliate of the Company will make a Residential Planning Application or in any manner, directly or indirectly, promote the Property for any form of residential development through the LDF.”
For these purposes “the Company” meant Bound Oak and its successors in title, “the Beneficiary” was Charles Church, “the Undertaking Period” meant 7 years, and “Affiliate” meant a subsidiary or holding company, or a fellow-subsidiary.  
41.	 	The setting up of SFPL was handled by a Jersey business called Jersey Trust Company (“JTC”), and it was incorporated in Jersey on 21 October 2005, its first directors being a number of individuals provided by JTC: I will refer to them as “the JTC directors”.  SFPL’s Articles of Association included a provision (at art 13.10) requiring Majority Holder Approval (meaning approval by the holders of over 75% of the shares) for a number of matters, including (by art 13.10(d)):
“Any dealings of any nature between (i) the Company and (ii) any Holder or Director of the Company or the Property Advisor [ie Wharf] or any person connected with a Holder or Director of the Company or the Property Advisor save to the extent that such dealings are contemplated in these articles or any other agreement made in accordance with these Articles to which the Company and the relevant person are parties.”  	
This provision therefore reflected one of the things Mr Capodilista had been told by Mr Maggs in his letter of 3 October 2005.
42.	  	On 2 November 2005 contracts were exchanged for the sale of Sandford Farm  by Bound Oak to SFPL at a price of £12.25m, no doubt in substitution for the contract in favour of Sandford Farm LLP.  
43.	 	The contracts were completed on 9 November 2005.  Each investor’s investment was structured so that only a small part (0.01%) was used to acquire shares in SFPL and the balance was in the form of a loan.  The loans were repayable on the distribution of proceeds following a sale of the property, without interest, the intention being that any profits would be distributed by way of dividend on the shares.  Thus to take Mr Capodilista’s £500,000 as an example, £50 was used to acquire 5,000 1p shares, and the balance of £499,950 was a loan to SFPL on the terms of a loan note.  This structure, the purpose of which was to enable the investors’ rights to repayment to rank pari passu with unsecured third party creditors, had no effect on the proportion in which the investors owned SFPL.  A total of 52,500 shares were issued (including the two original subscriber shares) in direct proportion to the investments made: thus for example Mr Capodilista who had invested £500,000 out of £5.25m received 5000 of the 52,500 shares or just over 9.5% of the total.
44.	 	The amounts drawn down from Investec amounted in total to £11,327,500 made up of a Senior Loan of £7,937,500, a Mezzanine Loan of £1,250,000 and a VAT Loan of £2,140,000.  The VAT loan was a short-term loan repayable after 4 months (and in fact repaid in February 2006), but the Senior and Mezzanine Loans were each for a term of 2 years, the difference between them being that the Mezzanine Loan carried a higher rate of interest.
The PAA  
45.		On 8 November 2005 (the day before completion) the PAA was entered into between SFPL and Wharf.  The main purpose of this was to specify the services to be provided by Wharf to SFPL and the payment to Wharf of half the profits of the development by way of fee for those services.  In the light of the arguments addressed to me, it is necessary to set out quite a few of its provisions, as follows:
(1)	 	By cl 3.1 SFPL (“the Owner”) appointed Wharf (“the Advisor”) to provide the Services during the Term.  
(2)	 	The Services were those services listed in schedule 1.  They included (at paras 1.2 and 1.3):
“Applying for appropriate planning permission for Phase 1 of the Property in accordance with the Appraisal.
Assisting the Owner in procuring a Realisation following obtaining of planning permission (or failure to do so).”
(Appraisal meant such appraisal as should be presented by Wharf and agreed by SFPL every 6 months; Phase 1 Property meant the part of the property the subject of the planning application provided for in the Appraisal; and Realisation meant disposition, refinancing or the equivalent of the Phase 1 Property which enabled SFPL to realise the value).
(3)	 	The Term was from the date of the agreement until it was terminated in accordance with cl 9, which in effect provided that SFPL might terminate the agreement for material breach or on Wharf’s insolvency, and that the agreement should terminate if Mr Maggs ceased to be involved with Wharf.  
(4)	 	By cl 3.2:
“The Advisor in carrying out its obligations under this Agreement shall act only as advisor to, and on the instructions of, the Owner and shall not act nor hold itself out as having authority to act, on behalf of the Owner and/or the Administrator in any way which is beyond the scope of this Agreement.”	
(Administrator is not one of the defined terms and appears to be unexplained). 
(5)	   	By cl 3.3:
“The Advisor shall have no authority on behalf of the Owner to enter into any binding agreement in any form with any party.”
(6)	 	By cl 3.4:
“The Advisor shall:
(a)	 provide the Services:
(i)	with all due skill and care, in accordance with the principles of good estate management, so as to protect and promote the Owner’s best interests and maximise the returns to the Owner…
(b)	 use all reasonable endeavours to protect the interests of the Owner in relation to the Property within the context of the Services that the Advisor is contracted to provide;
(c)	 on behalf of the Owner, pay such Agents’ costs as may be agreed from time to time with the Owner; and
(d)	 act in good faith towards the Owner and take all reasonable steps to avoid conflicts of interest.” 
(7)	 	By cl 3.5:
“The Advisor may make recommendations to the Owner to appoint Agents on behalf of the Owner (including, but not limited to, selling, letting and property management agents and solicitors) in relation to the provision of the Services, and the Owner shall bear the costs of any such appointments.”
(Agent meant anyone whom SFPL might from time to time appoint on the recommendation of Wharf to perform any of the Services.) 
(8)	 	By cl 7 SFPL agreed with Wharf throughout the Term to do various things including (by cl 7(i)):
“to act generally in good faith so far as this Agreement and the Advisor are concerned and to co-operate fully with the Advisor to enable it to carry out its duties and obligations under this Agreement and to procure the co-operation of the Agents in connection with the Agreement.”
(9)	 	Cl 8 concerned the Fee payable to Wharf in consideration of the Services.  By cl 8.2 the Fee consisted of (a) a sum equal to the Shareholder Priority Return (“the Catch Up”) plus (b) 50% of any Phase 1 Profits after payment of the Shareholder Priority Return and the Catch Up.  Cl 8.3 contained relevant definitions, including that of Shareholder Priority Return which was as follows:
“amounts payable to the Shareholders, by way of dividend, fees or otherwise out of Phase 1 Profits, sufficient to provide a repayment to the Shareholders of all loans and capital invested by them in the Owner with an IRR of 24%.” 
(IRR meant an Internal Rate of Return calculated in accordance with normal UK practice by reference to quarterly periods). 
(10)	 	Cl 14 provided for payment of expenses and costs as follows:
“14.1	The parties agree that the Operating Expenses and any other costs or expenses incurred by the Advisor in connection with the Transaction (including the appointment of any Agents) shall be borne by the Owner and where any such Operating Expenses or other costs and expenses are in respect of monies owed to a third party (including an Agent), the Advisor agrees to pay such expenses on behalf of the Owner directly to the third party no later than the due date set out in the relevant invoice (provided that monies have been received from the Owner in accordance with clause 14.2) and give notice to the Owner confirming that the payment has been made.
14.2	The Owner shall transfer to the Advisor’s nominated bank account such amount of monies as are required in order for the Advisor to effect full payment of the relevant invoice and such transfer shall be made at least five Business Days prior to the payment date referred to in the relevant invoice.”  
(11)	 	Cl 15.1 contained an entire agreement clause as follows:
“The parties acknowledge that this Agreement (together with any other documents incorporated, or referred to, herein) contains the whole agreement between the parties in respect of its subject matter and that it may only be varied by agreement in writing by all parties, and that no party is relying on representations or commitments by the other except as set out in it.  This Clause 15.1 does  not apply to fraud.” 
46.	 	On 15 November 2005 Wharf wrote to Catchphrase agreeing to pay it 40% of Wharf’s profit share under the PAA by way of fee for consultancy services.
After completion – investor updates 
47.	 	On 5 December 2005 Mr Maggs circulated the first investor update under the title “Post Completion Update”.  In this he said that a meeting had taken place with the Council’s Chief Executive who said that the Council wanted a combination of uses including a health and fitness element and possibly a “total care package” (retirement homes, sheltered and assisted living and residential/nursing home accommodation); the remainder of the site would be pursued for B1C (light industrial) and B8 (warehousing) development as originally planned.  The Council also required a further environmental study which would delay a planning application: it was envisaged that it would be submitted in March 2006 and consent granted in June 2006.  
48.	  	On 20 March 2006 Mr Maggs circulated a further Investor Update.  The proposal for a health and leisure complex had been shelved in place of a care package on about 10 acres and mixed commercial use on the balance.  A planning application was now envisaged after the end of April 2006 with a decision by July/August 2006.  The update suggested values of c £16m for the care development, and £28m-£32m for “this site” when consent was granted: this was ambiguous as it was not clear if the £28m-£32m was for the whole site (and so included the £16m) or was for the commercial element (and so additional to the £16m, making £44m-£48m in all).  Mr Capodilista asked Mr Maggs this question and got an answer that it was the latter.  
Replacement PAA and IAAs
49.	 	In April/May 2006 the PAA was replaced by 3 new agreements, a revised PAA with Wharf and two new agreements, each called an Investment Advisory Agreement (“IAA”), with Catchphrase and L&H.  The purpose of this, as explained by Mr Dominic Ribet of Forsters to Mr Bruce Horwood of JTC, was that Wharf had sub-contractual relationships with Catchphrase and L&H and the IAAs were designed to ensure that the relationships and the fees due became direct relationships of SFPL, thereby splitting Wharf’s profit share under the existing PAA three ways.  This was done as follows:
(1)	  	Wharf’s profit share was split 40% to Catchphrase, 40% to L&H and 20% to Wharf itself.
(2)	 	The revised PAA with Wharf (dated 9 May 2006) therefore changed Wharf’s Fee as specified in cl 8.2 to (a) a sum equal to 20% of the Shareholder Priority Return (“the Catch Up”) plus (b) 10% of any Phase 1 Profits after payment of the Shareholder Priority Return and the Catch Up (emphasis added).  Apart from a change in the definition of Shareholder Priority Return – as to which see below – no other changes from the original PAA have been identified before me, the Services and Wharf’s and SFPL’s obligations being the same as before. 
(3)	 	The IAA with Catchphrase (dated 18 April 2006) obliged Catchphrase to use its reasonable endeavours to introduce SFPL to investors for the purpose of financing the acquisition of the Property and Operating Expenses and provide such other advice and assistance as SFPL might reasonably require, for which Catchphrase was to be paid a fee of (a) a sum equal to 40% of the Shareholder Priority Return and (b) 20% of the Phase 1 Profits.  
(4)	 	The IAA with L&H (that is with Mr Maggs trading as L&H) was in similar form to the Catchphrase IAA save that it was dated 9 May 2006 and Mr Maggs’ services included providing general advice on the Property.  
50.	 	As referred to above, there was a change in the definition of “Shareholder Priority Return” in cl 8.3 of the revised PAA (and also in cl 6.3 of each IAA).  This was now defined to mean: 
“amounts payable to the Shareholders, by way of dividend, fees or otherwise out of Phase 1 Profits, sufficient to provide a return to the Shareholders of 24% on the amount of all loans and capital invested by them in the Owner.” 
51.	 	A comparison with the definition in cl 8.3 of the original PAA (paragraph 44(9) above)  reveals two differences.  The first is that the former definition included the return of the shareholders’ loan and capital itself whereas the revised definition simply referred to a return of 24%.  This later caused some concern that it did not entitle the investors to repayment of their investment, but I accept (as suggested by Ms Stevens-Hoare) that it was probably designed as a bona fide attempt to correct an error in the original.  As originally drafted Wharf would have been entitled to a Catch Up equal not only to the priority return to the investors on their investment, but to the investment itself plus the priority return.  That cannot sensibly have been what was intended and I think the correction was therefore made (in the interests of investors) to limit Wharf’s Catch Up.  
52.	 	The other difference was to change the investors’ priority return from 24% IRR to 24%.  That was I infer a deliberate change as the definition of IRR (only used for this purpose) was removed.  There is no hint in the contemporaneous documents that are in evidence as to why that was done.  Mr Maggs gave evidence in his s. 236 examination that he thought the original reference to IRR was a mistake and it was simply being corrected, but I attach little weight to that as he himself said that it was quite a long time ago and could not remember why the figure was 24%.  In the event of course it made no difference as the investors lost everything, but I am left with no reliable explanation as to why this was changed.  In those circumstances I am entirely unclear whether the original reference to IRR was indeed a mistake or not; it may have been, but it may equally have been that the statement made to the investors that they would receive a 24% IRR return (as in Mr Maggs’ letter to Mr Capodilista of 3 October 2005) and reflected in the original PAA was what was intended when made, and that Mr Maggs wanted it changed.  When the expectation was that the property would be held for less than a year it would make little difference, but once it became apparent that matters might drag on, the difference would become more significant – especially so if the later agreement meant that the priority return was not 24% per annum but a flat 24% however long the project took, which is how it was later interpreted (for example by JTC in May 2009) – and I suspect Mr Maggs was quite ready to try and change the terms in his own favour.  What can be said is that the JTC directors, who formally approved the new agreements at a Board meeting on 12 April 2006, did not pick up on this change to the terms or query it, nor did Forsters bring it to their attention: the JTC directors did ask Forsters to confirm that the fees shown in the new agreements did not exceed the fees charged in the existing agreements, which Mr Ribet did, but he did not explain this particular change.  It is an example of the JTC directors neither initiating nor negotiating a change to SFPL’s contractual arrangements but accepting a proposal made to them in effect by Wharf, and was one of the matters that later engendered a good deal of suspicion among the investors about Wharf.  
Planning application and refinancing
53.	 	A planning application was eventually made on 26 June 2007 in the name of SFPL for a development consisting of a retirement care village, and mixed commercial use (warehousing, offices, light industrial etc) (“the mixed scheme”).  
54.	 	On 28 June 2007 however the Executive of the Council accepted a recommendation by planning officers that all the reserve housing sites in the Local Plan, including Sandford Farm, be released for development in order to meet a requirement, contained in recent guidance from Government called PPS 3, that the Council demonstrate that it had a 5-year rolling supply of housing stock.   Initial advice given by Indigo Planning Ltd (“Indigo”) in July 2007 was that this meant that the primary use of the site should be as housing, with a presumption against other uses, but that the principal note of caution related to the suitability of the site with reference to the ground conditions (that is as a landfill site), and it was important that this was resolved; the mixed scheme had however been the subject of significant public consultation and discussion with the Council, and parties taking forward a residential application should be aware of the previous discussions with the Council in relation to commercial use.  
55.	 	By August 2007 consideration was being given to refinancing the project with Abbey.  The initial idea was to borrow enough not only to repay the Investec facilities (namely the Senior and Mezzanine Loans, amounting together to £9,187,500, which were due to be repaid in November in any event) but to provide cover for interest and ongoing professional fees, and to return capital to the investors.  By the end of August indicative terms for a loan of £25m had been provided, and for some time it looked as if the refinancing might happen at or about this level; but on 12 October it was put on hold as Abbey’s credit processes had led to a requirement for personal guarantees to be given jointly and severally by Messrs Maggs, Balfour and Mellor in the sum of £7m.  By 25 October a decision had been made to limit the borrowing to some £15m which would obviate the need for guarantees.  This was intended to be enough to cover interest and working capital but would not enable any repayment to be made to the investors.   
56.	 	In the event the refinancing was completed on 1 November 2007.  Under a Facility Agreement, Abbey agreed to make available a term loan in the aggregate amount of £15.2m for a term of 18 months (that is until 1 May 2009).  The Facility Agreement contained (at cl 21.1) a “loan to value” (or LTV) covenant under which SFPL agreed to ensure that the loan should not at any time exceed 70% of the most recent market value of the property.
57.	  	Among other instruments executed at completion was a charge by which SFPL charged Sandford Farm to Abbey by way of legal mortgage to secure all liabilities owed by SFPL to Abbey (“the legal charge”).  This contained, in the usual way, a power for Abbey at any time after it had demanded repayment of the secured obligations to appoint a receiver or receivers (cl 7.2); a provision that the receiver(s) should act as agent(s) of the chargor (cl 7.6.5) and a power for such receiver(s) to sell the property (cl 7.6.6(i)).
Payments to Ultramarine and others
58.	 	Although the total facility was £15.2m, SFPL could not draw down more than £13.5m by way of advance, the balance of £1.7m being available for the capitalisation of interest.  SFPL in fact drew down £12.5m.  This was sufficient to repay Investec its loans and an exit fee (which together amounted to some £10.44m), and Abbey’s fees, costs and expenses (some £360,000), leaving a net balance of some £1.69m available for SFPL, which was transferred to Forsters’ client account.  That was almost all used in paying outstanding invoices for professional fees and the like, some direct and others by way of reimbursement of Wharf.  Wharf asked JTC to authorise Forsters to pay them, and on 2 November JTC gave such authority.  Once all these invoices (and Forsters’ own bill and land registry fees) had been paid, there was a balance of only £174,680.66 left in Forsters’ client account, which was transferred to SFPL’s bank account in Jersey on 13 December 2007. 
59.	 	By far the largest of the invoices so authorised was a payment of £532,000 to Ultramarine Ltd.  No invoice had been provided to JTC before they authorised its payment, although one was promised.  In fact an invoice, dated 1 November, was provided to JTC on 5 November.  This was addressed by Ultramarine to SFPL and was in the sum of £535,000, described as fees for assisting and arranging and managing the refinancing and being “as agreed 3.5% of total sum”.  Ultramarine was a Gibraltar company incorporated by Mr Haynes, and the invoice asked for payment to his client account.  (The correct figure for 3.5% of £15.2m was in fact £532,000, the amount previously notified, not £535,000).  
60.	 	Mr Philip Burgin (one of the JTC directors) queried the invoice, saying that he was not aware of it and that they needed to clarify the services provided before approving payment.  In fact Wharf simply said that the person behind it was Mr Haynes and that if they had any further queries they should contact Mr Maggs or Mr Balfour.  JTC were evidently satisfied with whatever explanation they were given as on the same day (5 November) they formally approved a written agreement between SFPL and Ultramarine (backdated to 1 November) reciting that Ultramarine had provided certain services and that the agreement set out in writing the terms and conditions which had been agreed by the parties prior to its date, and confirming the appointment of Ultramarine to use its best endeavours to arrange and manage the refinancing of the debt in return for a fee of 3.5% of the aggregate amount of the loan.  On 6 November JTC duly asked Forsters to proceed with the payment to Ultramarine, and £532,000 was paid to Mr Haynes’ client account on 7 November.  
61.	 	Ms Rose described Ultramarine as another vehicle of Mr Maggs (in her judgment at [39]).   In this action Courtwood’s pleaded case is that it was a vehicle for Messrs Maggs, Mellor and Balfour.  The only evidence to that effect is an answer given by Mr Maggs in his s. 236 examination that Ultramarine was “basically the directors of Wharf”, that being all three of them, Mr Balfour, Mr Mellor and himself.  (They were all by this stage directors of Wharf: see paragraph 24 above.)  To set against that is Mr Mellor’s adamant denial that he ever had anything to do with Ultramarine or knew anything about it; and Mr Balfour’s evidence that he himself had no interest in Ultramarine, that he was certain that Mr Mellor was not connected to Ultramarine, and that he believed it to be Mr Maggs’ vehicle: Mr Maggs had asked him to ring up Mr Haynes and get him to set up a company, which he did.  Mr Haynes confirmed that Mr Balfour, for whom he had acted since October 2005, had asked him to incorporate a company, and to send an invoice on its behalf (the terms of which were either dictated, or sent as a draft, to him by Mr Balfour).  He did both these things as requested but very shortly afterwards Mr Balfour had contacted him again to say that it had been a mistake and asked him to transfer the company, and the money (which he had by then received) to Hassans, another firm of Gibraltar lawyers.  He remembered that, as it was unusual to be responsible for a company for such a short period.  He said that Hassans have to his knowledge acted for Mr Maggs on other matters; he has also been told by Mr Balfour that Hassans acted for Mr Mellor, but he has no confirmation of that other than what Mr Balfour has said.  
62.	 	On this evidence I have no doubt (on the basis of his admission in the s. 236 proceedings) that Mr Maggs was interested in Ultramarine.  On the other hand I do not think I can properly find that either Mr Balfour or Mr Mellor was also interested in it: Mr Maggs’ statement to that effect is not an admission by them, and I consider that almost no weight can be attached to it.  This is partly because Mr Maggs’ evidence in the s. 236 proceedings appears to have been generally rather imprecise (he repeatedly refers to the haziness of his recollection and the like), but mainly because Mr Mellor and Mr Balfour would have undoubtedly challenged him on this statement if he had been called to give oral evidence, and in circumstances where I have not the advantage of seeing him give live evidence, and where Ms Rose, who did, found him a thoroughly unsatisfactory witness, I think it would be quite unsafe to place any significant reliance at all on disputed statements made by him.  I therefore find that Ultramarine was on the balance of probabilities a vehicle for Mr Maggs alone; this is consistent with, although not established by, the account given by Mr Haynes. 
63.	 	Two other invoices were paid by Forsters on the authority of the JTC directors on 5 November, one for £120,000 plus VAT (totalling £141,000) from Robert Hook & Co, said to be for advice in relation to the commercial development and the like, and the other for £70,000 from Riminey Properties (in Monaco), said to be for advice in relation to acquisition of the commercial land element of the scheme.  No written advice from either entity is included in the documents before me, and these seem suspiciously large and round figures.  In the s. 236 examination, Mr Maggs said that Mr Hook was a chartered surveyor who had given advice specifically in relation to flood risks, and that the fee (which he thought he himself had negotiated as a flat fee) did not strike him as excessive; and that Riminey was a vehicle for Mr Holley, but he was vague as to the reasons for it.  There must be doubts whether these apparent fees were justified.  But these matters were not explored in evidence and I am in no position to make any findings one way or the other.
64.	 	The payments have already been the subject of litigation.  First, Ms Rose’s judgment records that a claim was brought by Ludsin (that is Mr Lisitsin, with the support of Mr Capodilista) as assignee of SFPL against the JTC directors in relation to the Ultramarine and other payments which they had authorised, and that the JTC directors entered into a mediated settlement under which they paid Ludsin £425,000 plus a contribution towards its costs (see her judgment at [39]-[40]).  Second, it appears from the s. 236 transcripts that an action was brought (I do not know by whom) against Wharf and Mr Maggs in respect of the payments to Ultramarine, Robert Hook and Riminey (and some other matters), but was discontinued against Mr Maggs, and stayed against Wharf when it went into administration, before it could be brought to trial.   
65.	 	In the present proceedings no relief is directly sought in relation to the payments.  I should say however that it is very difficult to see that the Ultramarine payment was a proper one.  Leaving aside any question whether Wharf, or Mr Maggs personally, owed SFPL fiduciary duties, it would appear to have been a straightforward breach of SFPL’s Articles which prohibited payments to anyone connected with a director of Wharf without Majority Holder Approval (see paragraph 40 above).  Moreover it would appear to have been quite untrue to say, as the agreement approved by the JTC directors on 5 November did, that it was setting out and confirming an agreement already made by SFPL with Ultramarine, as there is nothing to suggest that SFPL (that is the JTC directors) had previously made any such agreement or known anything about such an arrangement, and Ultramarine itself appears to have only been incorporated after the refinance was arranged, which means it can scarcely have either agreed to provide, or in fact provided, any services before then.  On the face of it therefore, this would appear to be a case of Mr Maggs again simply deciding that he should be paid a large fee out of SFPL’s (that is the investors’) money without any negotiation with anyone acting in SFPL’s interests, and then getting the JTC directors to sign off on it.  Mr Balfour said in evidence that Mr Maggs told him it was a finder’s fee, and that he (Mr Balfour) did not think it was particularly appropriate; he assumed (but did not know) that the payment was for Mr Maggs, but said that Mr Maggs was “somewhat of a law unto himself”.  By his own account however Mr Balfour not only did nothing to query or prevent it, but actively took steps to assist in seeing that it was paid, which scarcely reflects well on him, even though I have not found that he received any part of it.  All in all, I am not surprised that when it came to light the investors were very suspicious. 
Offers for the land
66.	 	Meanwhile unsolicited offers had been received for the land.  On 20 September 2007 Inland Homes sent a letter to CB Richard Ellis (“CBRE”) offering, subject to contract, £45m net of remediation costs.  (These were expected to be significant: a valuation for Abbey by CBRE as at 14 September 2007 referred to advice from RSK Group Ltd (“RSK”) estimating the cost at £7.65m.)  By 9 October Mr Balfour was reporting to Mr Mellor that Wharf currently had a contract out with Inland Homes for a sale at £45m; they had also received a bid for £45.5m from Westorn [sic] Homes and expected Barratt to revive an earlier discussion at £47m.  
67.	 	For some time the potential sale to Inland Homes was taken forward by Forsters on behalf of SFPL in what appears to be a normal manner: for example, Forsters sent replies to the purchaser’s enquiries, and prepared a draft contract, on 17 October.  I have seen nothing to suggest that there was any reluctance on the part of Wharf, or Forsters, to see the sale progress in the usual way.  But on 11 November Mr Wicks (the Chief Executive of Inland plc) sent an e-mail pulling out of the deal saying that he had come to the conclusion that the contamination issues were too great to proceed further.  I have seen no evidence as to what happened to the other potential offers for the land.
December 2007 to January 2009 
68.	 	SFPL’s application for the mixed scheme was refused by the Council on 11 December 2007.  The first reason given in the Notification of Refusal was that the land was allocated for housing in the development plan and needed to meet the 5-year housing land supply, and that SFPL had failed to demonstrate why a departure from the development plan should be made.  
69.	 	In March 2008 Mrs Balfour’s interests in SFPL (held by the Trust Corporation of the Channel Islands (“TCCI”) as trustee of the Oakley Settlement) were sold to a company called Arlington Special Situations Fund Ltd, a Cayman Islands company.  The total sale price was £325,000, split as to £112,488.75 for the loan note (its face value) and as to £212,511.25 for the shares (being 1,125 out of 52,500 issued shares or about 2.15% of the total).  The contract for sale was dated 18 March 2008, and the £325,000 was paid to TCCI’s account on 31 March 2008, and transferred to Mrs Balfour’s personal account on 1 April 2008.  This was a significant return on the original investment of £112,500: £325,000 for a 2.15% interest would equate to a value for the investors’ interests as a whole of some £15.2m, and (allowing for the Abbey debt, then standing at about £12.8m) imply a value for the land at about £28m.  
70.	 	In this way Mrs Balfour was the only one of the original investors not only to recover her investment but to make a substantial profit on it, which inevitably raises the suspicion that she alone was able to do that because her husband was an insider.  But this suggestion was not explored in evidence.  Indeed I received virtually no evidence at all in relation to this transaction.  Mr Balfour’s witness statement says nothing about it, and the entirety of Mrs Balfour’s evidence in her witness statement is to the effect that “In early 2008 Mr Maggs introduced a purchaser for the Oakley Settlement’s shares and loan notes, a company called Arlington…” followed by a factual account of what was paid.  In further information, when asked why the sale took place, she simply said that Mr Maggs had promoted and brokered the sale, and that it was sold “in part because of the lack of reliable information being provided in relation to the project”.  Nothing in the documentary evidence casts any further light on these explanations, or explains who Arlington was.  But neither Mr nor Mrs Balfour were asked any questions about this, and it does not form part of the pleaded case against them.  In these circumstances, despite my suspicions, I cannot I think properly find that she received preferential treatment to the other investors because of Mr Balfour’s position as director of Wharf.
71.	 	By May 2008 SFPL had spent the funds it had.  But it had only drawn down £12.5m of the £13.5m available under the Abbey facility and on 6 May SFPL, on Wharf’s advice, requested a draw down of a further £560,000.  The funds were received on 14 May.  
72.	 	On 13 June 2008 a residential planning application was submitted by Indigo.  The application was in the name of Woodley Developments Ltd (“WDL”).  WDL had been incorporated in the BVI by JTC on 1 August 2007; its shareholders were 2 JTC companies, apparently holding on trust for Wharf, and its director another JTC company.  It is clear from the documents that the reason this was done was because of a concern that if SFPL had made a residential planning application itself it might have been in breach of covenants supposedly given by SFPL to Bound Oak at the time of the purchase, presumably in connection with the Undertaking given by Bound Oak to Charles Church on 12 October 2005 (paragraph 39 above).  I need not consider if this concern was well-founded or not, as there is no doubt that this was the reason why WDL was formed and the application made in its name, and it is irrelevant whether SFPL was in fact under any obligation not to make such an application.  The initial suggestion (as recorded in an e-mail of 18 July 2007 from Donna McCrorie, a Trust Manager at JTC, to Mr Eadie of Forsters) was that a company should be formed to apply for planning permission, to be owned by the same persons as SFPL or possibly a subsidiary of SFPL; Mr Patterson of Forsters was however concerned that the structure would be looked through and SFPL deemed to be in breach of contract, and the intention was then changed so that WDL would be owned by Wharf.  
73.		The application was for a residential development comprising 492 dwellings (flats and houses), a Continuing Care Retirement Community, a village centre with 175 sq m of retail space, up to 336 sq m of business/restaurant floorspace, a community hall, energy centre, new access, car parking, two new bridges across the Old River and associated landscaping and works.   
74.	 	SFPL also appealed the refusal of its application for the mixed scheme.  I do not have firm evidence as to when this appeal was brought: Mr Barda suggested it was around January 2008, but in an Investor Update of April 2008 Mr Maggs referred to it as something that was “in hand” and still to be submitted, probably at the start of June.  It had certainly been submitted by 1 July 2008 when the Planning Inspectorate acknowledged the appeal and sent details of the timetable.  In due course an inquiry was fixed for 2 December 2008.  In the event SFPL withdrew the appeal on 6 November 2008.
75.	 	Mr Maggs’ explanation in the Investor Update of why the appeal was being pursued in parallel with the residential application was that the strategy, supported by their professional team, was to combine the two applications, and a third application for the discharge of reserved matters for the Oracle scheme, with a view to putting pressure on the Council to promptly deliver the residential consent.  I see no reason not to accept this as a genuine explanation; it is supported by Mr Barda’s evidence that the practice of “twin tracking” planning applications is a commonplace one, enabling negotiations to take place with the local authority for one of them to be dropped in favour of the other, and avoiding putting all one’s eggs in the same basket.  Mr Turner also gave evidence that there was little out of the ordinary in a party pursuing two different planning applications at the same time or submitting an application at the same time as an appeal, a strategy which has an obvious impact on a planning authority’s finite human and financial resources and which can encourage an authority to compromise on areas previously considered to be of concern.
76.	  	On 10 July 2008 SFPL, again on Wharf’s advice, requested a draw down of the remaining £440,000 available under the Abbey facility.  The funds were received on 16 July.    
77.	 	On 18 September 2008 Mr Alan Aimers of Abbey (Head of Corporate Banking Real Estate) wrote a letter addressed to SFPL in Jersey (although the JTC directors later said that they had never received it).  This referred to the decline in property values over the first half of the year which reflected market sentiment, with speculative land transactions, particularly where residential development was envisaged, proving particularly volatile assets.  Abbey had in the light of that obtained a further valuation from CBRE which valued Sandford Farm at £11.825m.  That meant the LTV ratio (calculated on the facility of £15.2m) was 128.3%, and that SFPL was therefore in breach of the LTV covenant under which the maximum LTV was 70%.  The letter however did not require any particular action from SFPL: it simply gave notice of the breach and reserved Abbey’s rights.  In the light of some later comments, I should note that there is nothing to cast doubt on Mr Aimers’ explanation of the reason this revaluation was undertaken (which appears plausible enough), or suggest that it was prompted by anything said or done by the investors.
78.	 	It appears from an e-mail of 27 October from Mr Aimers to Mr Maggs that they had had discussions, the upshot of which was that Mr Maggs would arrange for funds to be made available to cover the quarterly interest payment due at the end of October, in the sum of £278,974.48.  It would seem that this would not have been necessary if it had not been for the breach of the LTV covenant, as the total amount outstanding at the end of July was some £14.25m (representing £13.5m advanced and some £0.75m capitalised interest) and there was initially £1.7m available under the facility to meet interest.  But in the light of the breach of the LTV covenant, Mr Aimers evidently wanted cash deposited.  The arrangement he came to with Mr Maggs was that the funds would be deposited in a separate cash collateral account, earmarked to meet the quarterly interest payment, but would be returned if the LTV covenant were repaired. 
79.	 	Wharf provided the £278,974.48 required, and Abbey received it on 18 November 2008.  Mr Rob Murphy, Wharf’s finance director, later told Dr Shadrin (on 12 March 2009) that Wharf had provided a short-term unsecured loan to SFPL because the residential planning application had considerable support from the planning officers and was likely to be granted, and once it had been, a further refinance might have been available to raise further working capital and return funds to the investors.  That seems to me an inherently credible account of Wharf’s thinking at the time.  I have not seen any documentary evidence to suggest that the JTC directors of SFPL were kept informed or asked to consent to this arrangement at the time; but in a later circular to investors (on 18 March 2009) they did not dispute it, referring to it as “a short term unsecured loan” that was “received in good faith from Wharf to cover the Abbey Santander loan interest arrears for the quarter ended 31 October 2008”.
80.	 	WDL’s application for residential planning permission duly came before the Council’s Planning Committee on 7 January 2009.  A lengthy and detailed officer’s report (from Mr Bishop, the Council’s Head of Development Management) concluded that the proposed development was in accordance with the Council’s adopted policy and recommended approval (subject to conditions).  However there was very considerable local opposition and the Committee refused the application.  On 8 January Mr Aimers asked Mr Maggs and Mr Murray for a report on why it had been refused and the likely outcome of an appeal so that he could report to Credit, adding to Mr Maggs that “obviously we will need you to keep interest current meantime”, the next quarterly interest payment being due on 30 January in the sum of £266,172.36.  Mr Murray replied in positive terms, to the effect that a protracted negotiation with officers had led to an unqualified statement of support, that the committee members were minded for purely political reasons to find a reason to refuse the application, and had done so on the grounds of density and design, that the two reasons for refusal should be relatively straightforward to address, and that their architects were confident of their prospects of success.  He anticipated having an answer by June as long as the Secretary of State did not reserve the matter for her own decision.  Mr Aimers replied on 19 January that having spoken to Credit they were happy to continue with the facility “on the basis interest is kept current”, and would extend the facility to 31 July 2009 but would be looking for an interest service guarantee to be put in place for 6 months’ interest at £600,000.  He again asked Mr Maggs to confirm that arrangements were in hand to fund the interest due at the end of January.   
81.	 	On 4 February 2009 WDL appealed the refusal.
February 2009 to 29 June 2009
82.	 	An update to investors in the form of an “Appeal strategy note” was prepared in February 2009.  Mr Capodilista received a copy from Mr Balfour on 12 February, and Dr Shadrin a copy from Mr Murphy.  The note largely repeated what Mr Murray had told Mr Aimers about the Committee meeting and the prospects and timetable for an appeal.  It told investors however that the appeal process would require “a small amount of further cash injection from investors”.  This figure was quantified at £750,000, made up of (i) the interest due at the end of January (£266,000, which had evidently not been paid); (ii) interest for a further two quarters at £133,000 per quarter (interest under the facility was linked to LIBOR and this reduction in the quarterly charge reflected a steep drop in LIBOR rates); and (iii) a total of £200,000 for appeal costs (which reflected advice from Indigo).
83.	 	This request for significant extra funds from the investors, who had originally been told that the investment was a short-term project with good prospects of success, and who had been led to believe that everything was progressing satisfactorily if a bit slowly, must have come as an unwelcome surprise, and one can see reflected in the correspondence from this point on a growing disquiet among the investors (or at any rate some of them).  Mr Lisitsin’s interests were represented by Mr David Judah of Wallace LLP (“Wallace”), a firm of solicitors who had been in correspondence with JTC for some time about having shares in SFPL registered in Ludsin’s name rather than that of Eco3.  Mr Judah had been pressing for various items of information, and now on 19 February raised a number of questions, including what had happened to the difference between the Abbey loan and the Investec loan, and what arrangements there were to replace or renew the Abbey loan given that it was due to terminate on 1 May.  On 2 March Mr Capodilista e-mailed Dr Shadrin saying that he thought Wharf might have “borrowed” money from SFPL in the expectation of receiving planning, and that he was extremely worried about what might have gone on.  On 3 March Dr Shadrin sent both Mr Lisitsin and Mr Capodilista a draft of a reply he proposed to send to the request for extra funding, which raised a number of questions.  
84.	  	On 4 March Mr Maggs wrote to Dr Shadrin on behalf of Wharf.  Having referred to the interest payment required on 9 March (itself 6 weeks past the due date) and the fact that “You will be aware that we met the last quarter’s interest and have met ongoing costs and committed to fees to bring our appeal forward”, he effectively said that unless there was a commitment from sufficient investors to cover the £750,000, they would have to tell Abbey that they could not take the project forward which would undoubtedly lead to the appointment of an administrator or LPA receivers, which in his view would mean that all equity would be extinguished.
85.	  	On 9 March Dr Shadrin sent his reply to Mr Murphy; among other things it said that the shareholders did not expect to be in a situation where they could lose all their investments, but currently the bank could take over the site and sell it at a price that would repay Abbey only, the shareholders only being informed about the problem when interest was 6 months overdue.  He added that the shareholders were strongly convinced that the terms of the advisory agreement between SFPL and Wharf had to be changed.  
86.	 	On 16 March Mr Murphy sent to JTC a draft of a letter to be sent out to investors by SFPL; it was sent on 18 March.  This reiterated the need for funding, the amounts now said to be required including £278,974 for repayment of Wharf’s payment of interest, and £13,500 for holding costs, thereby increasing the total to over £1m.  The letter warned that SFPL was unable to meet its financial obligations and it appeared inevitable that the bank would take radical action unless funds were received; should the bank decide to enforce its security, this might result in the loss of some or all of their investment.
87.	 	This demand again caused disquiet.  On 19 March Mr Capodilista sent an e‑mail to Mr Murphy with queries, including what had happened to the turn on the original purchase, which he said Wharf had explained at the time as necessary to pay for expenses going forwards.  On the same day Mr Judah sent an e-mail to JTC with his own detailed queries, and also started trying to elicit support from other shareholders for a co-ordinated approach.  
88.	 	Then on 20 March (a Friday) Dr Shadrin sent an e-mail to Mr Capodilista, Mr Judah and also Mr Mike Brown (a representative of another of the Eco3 investors, Rapid Brickwork Ltd).  This said that to his mind Wharf’s and JTC’s proposals were unacceptable and proposed (1) the immediate appointment of new directors for SFPL representing shareholders; (2) terms of renewal to be negotiated with Abbey before any new money was paid; and (3):
“Agreement with WLI [Wharf] has to be changed.  Firstly, no new money should be paid to WLI until the shareholders are satisfied with the financial reports and explanations given.  Secondly, distribution of profits shall be changed.  The loan note holders shall be paid 24 per cent, then the profit shall be used to share between the shareholders and WLI as 80/20.  However, should the planning permission be not granted until the end of this year, SFPL shall be able to cancel an agreement with WLI with no further financial obligations to WLI.  Paying more money under the current management agreement with WLI seems unacceptable.”   	
Mr Cunningham in his submissions identified 12 key steps to the breakdown of the relationship between the investors and Wharf and this e-mail from Dr Shadrin, with its threat to renegotiate the terms of Wharf’s agreement, was the first of his 12 steps.  	
89.	 	Mr Brown forwarded the e-mail that evening to Mr Darren Davison, also of Rapid Brickwork, and Mr Davison forwarded it to Mr Balfour.  Mr Balfour in turn forwarded it the next morning (21 March 2009) to Mr Maggs with the comment:
“Doug, this is a useful e-mail.  We must talk.  
It would seem that they want to do us out of our share and put a time scale on us till the end of the year.”
	He spoke to Mr Maggs, and then forwarded the e-mail to Mr Mellor with the comment:
“David, looks like a written confirmation of war.  Have talked to Doug.”
90.	 	This e-mail is the second of Mr Cunningham’s 12 steps.  Courtwood’s case is that with its characterisation of matters as a confirmation of war it marks the point at which Messrs Balfour, Maggs and Mellor regarded the investors as the enemy.  Mr Balfour said in evidence that he thought that doing Wharf out of its share was fairly aggressive, but he did not think Wharf started a war.  He also denied that he described Dr Shadrin’s e-mail as “useful” because it gave them an angle and leverage for starting a war which ended up with them owning the property; he said it was “useful” because it was full of suggestions.  I am frankly sceptical about that: Mr Balfour obviously regarded Dr Shadrin’s e-mail as hostile, and in that context it does seem to me unlikely that Mr Balfour thought it made useful suggestions, and Mr Beasley did not try to support this.  It is not possible to be sure what Mr Balfour did mean.  It is possible, as Mr Beasley suggested, that he was being ironical; but I think it more likely that he was not referring to Dr Shadrin’s e-mail at all, but to Mr Davison’s e-mail forwarding it, and all that he meant was that it was useful to see Dr Shadrin’s thinking.      
91.		Mr Mellor was himself already thinking about what might be done if the investors did not contribute any further cash.  That week (the week beginning Monday 16 March) he had arranged a meeting with Mr Mike Evans, although it was in fact put off until the next week.  Mr Evans ran a business called Evans Randall Investment (“Evans Randall”) which raised money from investors to invest in property, and Mr Mellor had acted as a consultant to that business; he thought Mr Evans might be prepared to introduce one of his investors into Sandford Farm.   Discussions were also opened with the Kirsh Family Office for Kirsh to provide a guarantee or deposit to service the facility and meet the cost of the planning appeal.  Mr Mellor was evidently considering ways to save the project, and hence Wharf’s interest in profits, from collapse.
92.	 	On 20 March 2009 Abbey sought another valuation of Sandford Farm, this time from Savills.  Again there is no indication in the documentary record that this was prompted by anything said or done by the investors: Mr Aimers said in his letter of 9 April 2009 (below) that it was commissioned in the light of SFPL’s failure to secure planning permission.  Since Savills were also specifically asked to comment on the likely success or otherwise of the appeal, I see no reason to reject this explanation.
93.	  	Mr Judah met with two of the JTC directors (Mr Burgin and Ms Saffron Harrop) on 1 April.  It was agreed that the focus should be on the Abbey loan.  An “open forum” meeting for all investors, to be held at Wharf’s offices with at least one JTC director in attendance, was then fixed for 23 April.  In preparation for that, Mr Aimers sent a letter dated 9 April 2009 (addressed to “The Director, SFPL” but copied to Mr Maggs at Wharf and starting “Dear Douglas…”) which set out Abbey’s position.  He reiterated that SFPL was in breach of the LTV covenant.  He then said that Abbey held Credit approval to extend the facility to the earlier of 2 months after receipt of planning approval or 31 July 2009 but on terms that Abbey was satisfied with the Savills valuation, LTV being acceptable both pre- and post-planning approval, interest being kept current, and the provision of a guarantee equivalent to two quarters’ interest.  Ms Harrop then invited all the investors to an investor update to be held at Wharf’s offices on 23 April, attaching the Abbey letter and a statement of the funding requirement taken through to December 2009.  This now included interest to the end of the year (another £400,000), outstanding invoices (c £250,000), a revision to planning appeal costs (now £250,000), and JTC fees (c. £50,000) making the total over £1.77m.     
94.	 	The meeting on 23 April was cancelled at the last moment as Mr Burgin was unable to attend due to fog in Jersey, although some of the investors arrived and had an informal meeting anyway.  It was refixed for 29 April.  In advance of the refixed meeting Mr Judah contacted Mr Bligh with a view to him taking on a role for the investors.  
95.	 	On 28 April Mr Barda sent Mr Burgin a draft letter to be sent to investors pressurising them to pay (referring to it being “disappointing that your payment has not been received…the bank’s patience is now about to be exhausted…The consequences of not paying are too obvious to be worth stating”), which he said Mr Mellor had asked him to send; Mr Burgin however suggested not doing so in the light of the meeting the next day.  The next morning Mr Barda spoke to Mr Burgin, the result of which was that he sent him a draft e-mail to go to investors ahead of the meeting saying that the clear focal point should be the extension of the banking facility; Mr Burgin understood that Mr Mellor was very keen that this should go, and indeed Mr Barda later came back with a more strongly worded version, explaining that after speaking to Mr Mellor there remained “some real concern that the investors be made aware of the full extent of the parlous state of our banking relationship”.  In fact Ms Harrop had already sent the earlier version.  This exchange illustrates that by this stage Mr Mellor was becoming closely involved in Sandford Farm, and was keen to see the investors put in the money required to keep the project afloat.
96.	 	The meeting on 29 April was well attended and by all accounts a positive one.  Mr Maggs told the meeting that a date of 23 June 2009 had been set for the appeal in respect of the residential application, and that Wharf were confident that the appeal would be successful.  One of those present was Mr Charles Lousada.  He had been in contact with some of the investors and had been introduced to Mr Capodilista as having substantial property experience, but he also knew Mr Maggs, being a shareholder in another Wharf deal; it appears that it was thought he could act as an honest broker between Wharf and the investors.   He told the meeting that he was confident that planning permission would be granted and that investors would get their money back.  Mr Bligh later used the phrase “90% chance” in an e-mail and thought that it came from this meeting, although he could not remember if it was from Wharf or Mr Lousada; Mr Mellor thought it was Mr Lousada’s phrase and I suspect he was right.  
97.	 	Mr Judah said that Messrs Capodilista, Lisitsin and Jelly wanted Mr Bligh to be appointed to the board; this was agreed by all the other shareholders present and Mr Burgin said he had no problem with it.  The shareholders also wanted Mr Bligh, and Mr Bardo Akay, a former banker who was assisting him, to be involved in negotiations with Abbey.  Mr Maggs agreed to try and arrange a meeting with Abbey for them for 5 May.  He indicated that Wharf had a good working relationship with Abbey and that Abbey were unlikely to call in the loan provided the interest was being paid.  
98.	 	On 2 May 2009 Mr Bligh sent a letter to Messrs Lisitsin, Jelly, Capodilista and Shadrin (asking them not to circulate it further).  This set out his and Mr Akay’s joint perception on the situation with the Abbey loan, and asked the recipients to indicate their appetite to invest further cash, as this would inform how they needed to progress negotiations with Abbey.  The letter set out four options.  Option 1 would be for shareholders to put up £2-300,000.  They thought this insufficient to gain planning consent.  Option 2 would be to raise the absolute minimum for creditors other than Wharf and Abbey, which they put at £6-700,000, with a view to persuading Abbey to accept this as a means of getting to a planning consent.  Option 3 would be to tell Abbey that the shareholders would support SFPL; it might be possible to negotiate the amount required to say £1.5m.  Option 4 was to put in no additional cash; unless money was raised from elsewhere, the inevitable result would be repossession and shareholders would almost certainly lose their entire equity interest.
99.	  	Mr Lisitsin replied on 5 May expressing a preference for Option 2, and being unsure if he would support Option 3.  Mr Capodilista’s view was similar.  
100.	 	On 7 May the JTC directors agreed to appoint Wallace as solicitors to SFPL in place of Forsters (who had stood down after the 29 April meeting).  This however ran into opposition from some of the smaller investors, who expressed concerns that Wallace were Ludsin’s solicitors and not truly independent.  Some at least of the opposition appears to have been got up by Mr Balfour.
101.	 	Meanwhile despite the fact that Mr Maggs had agreed to arrange a meeting with Abbey for Mr Bligh, Mr Bligh found it difficult to get one arranged.  He got the impression Mr Maggs wanted to control access to Abbey and was being obstructive.  Eventually a meeting was fixed for them both to meet Mr Aimers on Friday 15 May.  Mr Bligh had hoped to meet Mr Maggs beforehand so they could discuss strategy but that too proved difficult to arrange.  On 13 May he did meet Mr Balfour (with Mr Murphy).  A report he made to Mr Judah of Wallace immediately afterwards included the comment that:
“I believe they are genuinely keen that a refinancing is negotiated.  It did not seem to me that they were keen for the refinancing to fail and JV with Abbey’s receiver.  However they may just be good actors.” 
In oral evidence Mr Bligh said that that was his view at the time but his belief as to what was happening went through a gradual change.
102.	 	The meeting with Mr Aimers was fixed for 9.15 on 15 May at Wharf’s offices.  Mr Bligh had been told that Mr Maggs would be able to see him at 9 for a catch-up beforehand but found when he got there that he was kept waiting until 9.15 when he was shown into a meeting room to find Mr Aimers and Mr Maggs already there; he concluded they had already had a pre-meeting between themselves (and Mr Maggs’ diary confirms that a meeting was arranged between him and Mr Aimers for 8).  Mr Aimers produced a valuation of Sandford Farm which Abbey had commissioned from Savills.  It was dated 7 May although Mr Aimers said it had only become available that day.  Savills had valued the land on 3 bases, as follows: (a) its current market value (as it stood without planning permission) at £8m; (b) its current market value on the assumption planning permission had been granted for the proposed residential scheme at £10m; and (c) its estimated value on the assumption that normal lending conditions had returned, planning permission had been granted and all remediation works carried out, at an assumed date of 2012, at £44.25m.  Mr Aimers said that the valuation raised an issue with the LTV covenant and that Abbey wanted this remedied immediately, otherwise Abbey would be looking at appointing receivers.  Mr Bligh described this in evidence as a surprising and unexpected development (at least to him).  After agreeing to provide Mr Bligh with a copy of the valuation Mr Aimers left the meeting and Mr Bligh continued with Mr Maggs.  Mr Maggs claimed to be surprised as well, but Mr Bligh thought this was unconvincing and found himself being drawn to the conclusion that Wharf stood to benefit from SFPL’s failure and was engineering the situation.
103.	  	In the afternoon of the same day Mr Murray sent the JTC directors two formal letters on behalf of Wharf addressed to the Directors of SFPL.  The first referred to the £278,974.48 that had been provided by Wharf in November 2008 to meet the October interest payment due to Abbey (paragraph 78 above).   Wharf’s letter confirmed that that sum remained outstanding as a debt from SFPL to Wharf, and asked the directors of SFPL to sign and return a copy  by way of acknowledgment and agreement.  
104.	 	The second letter referred to a sum of £495,237 which SFPL had advanced to Wharf as an on account contribution to the costs of the residential planning application, and enclosed an invoice from Wharf to SFPL for £494,460.26 for planning costs.  The explanation of this is as follows.  The planning application had been made in the name of WDL (paragraph 71 above).  Wharf had asked SFPL to advance sums to meet the costs, which SFPL did in various tranches, a first payment of £46,737 on 8 July 2008, a second payment of £404,000 on 26 August 2008, and further payments totalling £44,500 between September and December 2008.  These were treated as loans (and for example draft accounts of SFPL for the year ended 31 August 2008 prepared in November 2008 duly showed a loan receivable from Wharf of £450,737).  Wharf in turn used the money to meet various costs of the planning application incurred by WDL, the first payment of £46,737 being used for the application fee itself and the rest for fees for planning consultants, architects and the like.  By March 2009 Wharf had paid a total of £494,460.26 on behalf of WDL.  Wharf was now raising a formal invoice for these sums.  Again Wharf’s letter asked the directors of SFPL to sign and return a copy by way of acknowledgment and agreement.  
105.	 	The events of 15 May were (together) the third step of Mr Cunningham’s 12 steps.  He pointed out that the combined effect of Wharf’s two letters was that whereas Wharf had been shown as owing SFPL some £½m in August 2008, Wharf was now claiming to be a creditor for over £¼m.  
106.	 	Mr Bligh provided Mr Burgin of JTC with a letter which was sent to investors on 22 May.  This was designed to test their support for a proposal to raise an initial sum of £350,000 to fund negotiations with Abbey, with further funds required in the next 12 months, and the agreements with Wharf to be renegotiated.  Mr Bligh was at the same time looking for a new third party funder, and by 26 May was discussing with Mr Akay and Mr Judah a plan to use a NewCo to acquire the property; as he accepted in cross-examination, such a restructuring would have enabled them to negotiate with Wharf and possibly cut them out.  
107.	  	Wharf had obtained a copy of the letter to investors and on 27 May Mr Murray wrote to the directors of SFPL to the effect that the project was at a critical stage and Wharf’s involvement critical to the success of the project.  It referred to the £278,974.48 as immediately payable and required SFPL’s proposals to clear it the next week failing which it would instruct solicitors.
108.	 	On 28 May Mr Bligh wrote himself a note headed “SFPL Strategy” which set out a number of alternative courses of action.  One of the options was to keep the existing corporate body (SFPL) but for Ludsin and like-minded shareholders to invest in it so as to obtain control of it.  One of the identified disadvantages was that SFPL was contractually tied to Wharf and any renegotiation with Wharf would have to be consensual.  Another option was for Ludsin (possibly with other shareholders or new equity from elsewhere) to invest in a new corporate body to acquire the property with Abbey’s consent (“eg Abbey appoint a receiver and sell to NewCo”); one of the identified advantages was that Newco would have no contractual ties to Wharf, but identified disadvantages included the possibility that Wharf might seek to frustrate the action, or counterbid, and that there was still a problem that WDL was owned by Wharf.
109.	 	Also on 28 May Mr Judah sent a letter to the JTC directors on behalf of what were termed “the Majority Shareholders” (in effect Ludsin, Dr Shadrin and Mr Capodilista, who between them held over 50% of the shares of SFPL) stating that the Majority Shareholders had no confidence in the existing board and inviting them to co-operate in appointing new directors.  Mr Burgin replied on 29 May that the board was minded to step down and would reconvene on Monday 1 June to consider it further.  This correspondence found its way to Mr Balfour who passed it to Mr Mellor with the comment:
“Time is running out.  I have tried to contact Burgin on his mobile to stiffen his resolve.  I will talk to Doug as well who has this”  
110.	 	At some time at the beginning of the next week Wharf met Mr Aimers and requested him to appoint an administrator.  This was originally the fourth of Mr Cunningham’s 12 steps but in closing he put it after the resignation of the JTC directors (below) and I agree that this is more likely.  I heard no evidence directly about it but it is referred to in a letter of 12 June from Jeffrey Green Russell (“JGR”), Wharf’s solicitors.
111.		On 2 June the JTC directors of SFPL held a board meeting at which they appointed the new directors requested by the Majority Shareholders and themselves resigned.  The new directors (and secretary and registered office) were provided by a Jersey corporate services provider, Vivat Trust & Corporate Services Ltd (“Vivat”).  That is the fifth of Mr Cunningham’s 12 steps.  Mr Bligh sought to meet with Mr Aimers, but on 4 June Mr Aimers sent a letter to Wallace saying that the matter was now being handled by Mr Hamilton, Head of Restructuring, and inviting proposals to deal with the existing defaults.  Mr Bligh’s reaction was that a concrete proposal should be put to Abbey, commenting in an e-mail of 5 June to Mr Akay that:
“the further ahead and more organised we appear to be, the more attention they will pay and the more they will prefer us to Wharf et al.”  
He accepted in oral evidence that there were certainly by then two camps.
112.		On the Wharf side, a proposal was put forward by Mr Evans of Evans Randall on 8 June.  This was an offer, subject to contract, to purchase the property through a new SPV for £15m on terms that Abbey would extend a new loan of at least £9.75m for 30 months.  Mr Evans had been having discussions with Mr Mellor and Mr Maggs, and an e-mail from him of 3 June shows that the plan was that Evans Randall would provide the equity required, and that the profit on a resale after a preferential return to the equity investors would be split between the equity investors (60%) and the “promoters” (40%), which I accept was a reference to the Wharf camp.  The offer letter was itself drafted in Wharf’s offices and provided to Mr Evans.  The Evans Randall offer is the sixth of Mr Cunningham’s 12 steps. 
113.	 	On 10 June Abbey sent a formal reservation of rights letter to SFPL.  This identified two defaults under the Facility Agreement of 1 November 2007: a breach of the LTV covenant and the failure to repay the facility on its maturity date (1 May 2009).   It did not call for any particular action but said that defaults were a matter of considerable concern and that all options available to Abbey were being considered, and reserved all Abbey’s rights.  This is the seventh of Mr Cunningham’s 12 steps.
114.	 	On 11 June Mr Hamilton told Mr Bligh that he would like to see the borrower’s written proposal with regard to the loan by close of business the next day (Friday 12 June); that evening Mr Bligh sent him in draft a proposal under which a new company, Ashenbury Properties Ltd (“Ashenbury”), would acquire the land for £4.5m with a further £0.5m on planning being granted at the appeal, and Abbey also acquiring 20% of the equity in Ashenbury.    
115.	 	On the same day however Wharf presented a petition to the High Court in London for SFPL to be wound up, relying on indebtedness of £249,458.  This is the eighth of Mr Cunningham’s 12 steps.
116.	 	On 12 June Mr Philip Cohen of JGR wrote a letter to Mr Aimers of Abbey.  It referred to the petition of which Abbey was aware, and the fact that Abbey had indicated that it would be appointing an administrator.  It said that Wharf hoped to develop proposals with Abbey, part of such proposal being that Wharf would control the site; and that Wharf would not be minded to go ahead with the appeal if they were in any doubt as to their long term interests in the site.  It then said that the Evans Randall offer was still open.  This is the ninth of Mr Cunningham’s 12 steps.
117.	  	On 15 June Abbey rejected Mr Bligh’s draft proposal as unacceptable.  It then sent a formal letter to SFPL demanding repayment.  This referred to three outstanding Events of Default under the Facility Agreement (the two previous ones of breach of the LTV covenant and the failure to repay, to which was added the presentation of the petition), cancelled the facility and demanded immediate payment, the total sum payable being some £15.2m.  Later the same day Abbey appointed the Receivers (Ms Jane Moriarty and Mr Myles Halley of KPMG) to be joint receivers of the property.   The formal calling in of the loan and the appointment of the Receivers were the tenth and eleventh of Mr Cunningham’s 12 steps.
118.	 	On 16 June the Receivers invited unconditional bids for the property by 19 June with a view to exchanging contracts by 22 June.  On 18 June Evans Randall made an offer of £15m.  On 19 June Wallace submitted two alternative bids on behalf of Ashenbury, one a straight purchase for £5.05m, and the other a purchase at £4m with deferred consideration and an equity share. 
119.	  	Also on 19 June Mr Maggs sent a letter to Mr Steve Absolom (a Senior Manager at KPMG who was assisting the Receivers) on behalf of Wharf and WDL.  It said that WDL was not prepared to proceed with the appeal under the current circumstances, and that:
“It is our view that the receiver should engage with a credible purchaser as soon as possible (and certainly before the commencement of the appeal, 23rd June, 2009) who in turn will come to terms with us to enable the appeal to go forward and value to be maintained.
For the avoidance of any doubt, [WDL] have full ownership of the planning application, the intellectual property supporting both the original application and the forthcoming appeal.”
This was the last of Mr Cunningham’s 12 steps.
120.	 	In a letter dated 22 June Savills recommended acceptance of the offer from Evans Randall.  They must have communicated that to the Receivers either the previous day or early that morning as Mr Absolom told Mr Bligh by e-mail at 08.45 on 22 June that the Receivers had accepted a higher cash offer for the site, which must have been the Evans Randall offer.  Something however seems to have caused Evans Randall to withdraw as Mr Bligh met Mr Murray and Mr Balfour that afternoon, who suggested going back to the idea that the shareholders fund SFPL, and Mr Bligh gained the impression that Wharf were not acting as if they were aware a bid had been accepted – either they did not know of the acceptance at all, or they knew it had fallen through.  The same afternoon Mr Maggs sent Mr Absolom a proposal under which an SPV with himself and Mr Mellor as directors would purchase the property for the amount of Abbey’s debt (but not to exceed £15m) and on terms that Abbey provide a facility for a further 30 months on soft terms.  There followed a flurry of activity: there was a telephone conversation between Mr Balfour and Mr Absolom that evening, an e-mail from Mr Balfour to Mr Absolom early the next morning (23 June), a further call between Mr Maggs and Mr Absolom that morning, and a refinement of the offer in a letter from Mr Maggs to Mr Absolom that afternoon.  In the meantime Mr Absolom on the morning of 23 June had left a voicemail for Mr Capodilista (who had contacted the Receivers direct) and sent him an e-mail, in both of which he invited him to submit a bid immediately if he wished to do so; he also called Mr Bligh and told him that they had a preferred bidder but were open for further offers.  On  24 June Mr Bligh did submit a revised offer from Ashenbury in the sum of £6m (to be financed by Abbey with a £2m exit fee), deferred consideration and equity in Ashenbury, but on 25 June Mr Absolom told Mr Judah that the offer had been considered but was not acceptable and that the Receivers had accepted another offer (subject to contract).  The same day the Receivers’ solicitors issued a draft contract to the Wharf parties.  
121.	 	Mr Bligh was still trying to put together a higher bid but on 29 June the Receivers exchanged contracts with Woodley (that is Woodley Properties Ltd, which was incorporated in Jersey that day) for the sale of Sandford Farm.  The parties to the contract were SFPL (acting by the Receivers) as Seller and Woodley as Buyer, with the Receivers joining in solely for the purpose of obtaining the benefit of any provisions in their favour.  Under that contract the price was £15m but completion was not due until 30 November, and the deposit paid was only £1.  Woodley had no assets of its own but Abbey agreed in principle to make a facility available to it of £15m to finance the acquisition, for a term of 3 years from completion with a joint guarantee from Messrs Maggs, Balfour and Mellor in the sum of £2.5m, and an exit fee of 15% of the net surplus.
Subsequent events 
122.	 	The planning inquiry to hear WDL’s appeal sat for 5 days between 24 and 30 June.  On 28 August 2009 the Inspector reported to the Secretary of State recommending that the appeal be allowed and outline permission granted.  On 3 November 2009 Ms Christine Symes (a Decision Officer at the Department for Communities and Local Government) confirmed to Indigo as Woodley’s agent that the Secretary of State agreed with the Inspector’s conclusions and was minded to agree with his recommendation subject to submission of a satisfactory planning obligation.  A new section 106 planning obligation was in due course agreed and submitted, and by decision letter dated 4 March 2010 from Ms Symes to Indigo the Secretary of State allowed the appeal and granted outline planning permission for residential development.    
123.	  	The sale to Woodley was completed on 1 December 2009.  There was no dispute that that was so, although I do not think I have seen the transfer itself.  I have however seen a draft of the transfer annexed to the contract of sale which shows, as one would expect, that the transferor was to be SFPL acting by the Receivers.  There are also in evidence a number of other documents ancillary to the completion (all of which are dated 1 December).  Among these are the Facility Agreement whereby Abbey made available to Woodley a term loan of £15m to complete the purchase; and a Guarantee whereby Woodley’s obligations under the Facility Agreement were guaranteed by Mr Maggs, Mr Mellor and Mrs Balfour (limited in respect of principal to £2.5m in aggregate with each being liable for one-third).  It had originally been contemplated that Mr Balfour would be the third guarantor and numerous drafts of the guarantee with him as guarantor were produced but in the event he was either unwilling to be, or unacceptable as, a guarantor and Mrs Balfour was asked to be guarantor instead.  
124.	 	Mr Maggs, Mr Mellor and Mrs Balfour were also at completion the beneficial owners of Woodley.  Woodley had been incorporated in Jersey by a corporate and trust services provider called Basel Trust Corporation (Channel Islands) Ltd and the two subscriber shares were held by Basel One Ltd and Basel Two Ltd, but on 6 November 2009 the board of Woodley approved the transfer of these shares to Night Rhythm and Tamadot respectively, and the issue of 1 further share each to Night Rhythm, Tamadot and Kingfisher.  The shareholdings in these companies were held by nominees for Mr Maggs, Mr Mellor and Mrs Balfour respectively so that their initial interests were as follows: Mr Maggs (Night Rhythm) – 40%; Mr Mellor (Tamadot) – 40%; and Mrs Balfour (Kingfisher) – 20%.  Various complex dealings in relation to their interests were later carried out, but I need not detail them here. 
125.	 	On 19 August 2010 Woodley exchanged contracts for sale of the development site at Sandford Farm to Taylor Wimpey UK Ltd (“Taylor Wimpey”).  The sale price was £27m, payable as to £2.4m by way of deposit on exchange, a total of £13.5m (including the deposit) on completion, together with VAT, £8m on 30 June 2011 and £5.5m on 22 December 2011.  There was also provision for Taylor Wimpey to pay overage calculated by reference to sale proceeds; the detailed provisions are complex but in essence the overage amounted to 50% of the sale proceeds between £143m and £161m, and 25% of the sale proceeds in excess of £161m.  The contract also contained mutual options under which Taylor Wimpey could acquire, or be required to acquire, the balance of Sandford Farm for £1.
126.	 	The sale to Taylor Wimpey completed on 26 August 2010.  The three tranches making up the £27m were paid in accordance with the contract, and two payments of overage have been paid: £1.188m in January 2015, and £13,045,545 in January 2017.  Courtwood’s legal team have devoted considerable time and effort into tracing where the monies went.  In very broad terms, (i) Mr Mellor now accepts for the purposes of these proceedings that he has received (either directly or indirectly via Tamadot) a sum of just under £2m out of the sale proceeds; (ii) Mrs Balfour admits that she and Woodcock (a company of which she is the owner and which became a shareholder in Woodley in place of Kingfisher) have received various sums, Woodcock’s receipts (according to Mr Haynes) being over £2.5m; and (iii) Mr Balfour denies receiving anything at all.  Courtwood does not accept these figures and a substantial amount of documentary and witness evidence has been adduced in relation to exactly what happened to the money, but I do not intend to set out the result of these investigations here.
127.	 	Courtwood obtained a proprietary injunction restraining Woodley from dealing with any proceeds of sale or overage, initially on a without notice basis from Hildyard J on 31 July 2015, and continued after a contested application by Asplin J on 11 July 2016.  That has had the effect of freezing the £13m-odd payment of overage in January 2017 (but not I think any other monies), subject to a minor variation sanctioned by Norris J on 14 July 2017 permitting a sum of under £120,000 to be paid in respect of certain professional fees incurred by Woodley.  
Issue (i) – did Wharf owe SFPL a fiduciary duty?		
128.	 	It is now possible to consider the issues which arise (summarised in paragraph 14 above).  A large number of points were argued but unsurprisingly counsel for the various groups of defendants each submitted that whatever the answers to the other issues the claim must fail because of the Brown v Bennett point, that is that the sale by the Receivers to Woodley was not itself a breach of trust or breach of fiduciary duty and in those circumstances the defendants cannot be liable for knowing receipt which is the only pleaded claim against them.
129.	 	For the reasons given in detail below, I accept this submission.  I will however consider the first three issues in case I am wrong on this point of law.  
130.	 	I will start with the question whether Wharf owed SFPL a fiduciary duty.  Mr Cunningham put his case in two ways.  First, he submitted that the terms of the PAA were such as to impose a fiduciary duty.  Second, he submitted that by its conduct Wharf in fact stepped outside its obligations under the PAA and became an agent for SFPL.
131.	 	The question whether the circumstances are such that one party will be found to owe fiduciary duties to another is one that frequently gives rise to some difficulty.  I was referred to a number of authorities, among which were the well-known classic statement by Millett LJ in Bristol & West Building Society v Mothew [1998] Ch 1 (“Mothew”) at 18A-C, White v Jones [1995] 2 AC 207 at 271 per Lord Browne-Wilkinson, F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2011] EWHC 1731 (Ch), and the recent judgment of Leggatt LJ (at first instance) in Sheikh Al Nehayan v Kent [2018] EWHC 333 (Comm) (“Al Nehayan”).  I have in fact recently considered some of these and other authorities myself in Glenn v Watson [2018] EWHC 2016 (Ch) (see at [128]-[134]), but I do not intend to engage in any lengthy analysis here.  For present purposes it is sufficient to say that I entirely agree with and adopt the analysis of Leggatt LJ in Al Nehayan at [153]-[166].  I do not need to set it all out, but it is worth citing just one paragraph from this valuable judgment, at [159]:
“Thus, fiduciary duties typically arise where one person undertakes and is entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person. (Such duties may also arise where the responsibility undertaken does not directly involve making decisions but involves the giving of advice in a context, for example that of solicitor and client, where the adviser has a substantial degree of power over the other party’s decision-making: see Lionel Smith, “Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another” (2014) 130 LQR 608.) The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal. This is the core of the obligation of loyalty which Millett LJ in the Mothew case [1998] Ch 1 at 18, described as the “distinguishing obligation of a fiduciary”. Loyalty in this context means being guided solely by the interests of the principal and not by any consideration of the fiduciary’s own interests. To promote such decision-making, fiduciaries are required to act openly and honestly and must not (without the informed consent of their principal) place themselves in a position where their own interests or their duty to another party may conflict with their duty to pursue the interests of their principal. They are also liable to account for any profit obtained for themselves as a result of their position.”
The way I summarised it myself in Glenn v Watson [2018] EWHC 2016 (Ch), after citing from a number of the authorities, was as follows (at [131(7)]):
“Without in any way attempting to define the circumstances in which fiduciary duties arise (something the courts have avoided doing), it seems to me that what all these citations have in common is the idea that A will be held to owe fiduciary duties to B if B is reliant or dependent on A to exercise rights or powers, or otherwise act, for the benefit of B in circumstances where B can reasonably expect A to put B’s interests first.  That may be because (as in the case of solicitor and client, or principal and agent) B has himself put his affairs in the hands of A; or it may be because (as in the case of trustee and beneficiary, or receivers, administrators and the like) A has agreed, and/or been appointed, to act for B’s benefit.  In each case however the nature of the relationship is such that B can expect A in colloquial language to be on his side.  That is why the distinguishing obligation of a fiduciary is the obligation of loyalty, the principal being entitled to “the single-minded loyalty of his fiduciary” (Mothew at 18A): someone who has agreed to act in the interests of another has to put the interests of that other first.  That means he must not make use of his position to benefit himself, or anyone else, without B’s informed consent. 
132.	 	Applying those principles I agree with Mr Cunningham that Wharf owed fiduciary duties to SFPL.  SFPL was a single-purpose vehicle.  Its only business was the project to acquire the land at Sandford Farm, obtain planning permission so as to increase its value, and then realise that value.  The directors of SFPL in Jersey were not selected for their expertise in such matters.  They were professional directors provided by a corporate services provider.  They were not expected to manage the project themselves.  That was to be done by Wharf.  That for example was how matters were described  by Mr Maggs to Mr Capodilista in one of his early communications on 3 October 2005 where he said that he understood that Mr Capodilista had agreed in principle with Mr Balfour to invest in the project and that he was writing to confirm the arrangements and then said among other things that “The property is to be managed by Wharf…”.  He said much the same thing at the other end of the relationship in his letter of 19 June 2009 to the Receivers where his letter began “We write as the development managers to the above proposed development…”.  Similarly Mr Barda in his witness statement described Wharf as “a company concerned with the management of land development opportunities on behalf of the land owners”, and said that if a site that Wharf had identified were purchased Wharf would then “manage the project until it was sold to a developer”.   
133.	 	That reflects the reality of the matter which was that the project was almost entirely managed by Wharf.  Mr Barda explained how the services set out in the PAA reflected his understanding of: 
“the usual terms on which we managed projects, namely [Wharf] provided recommendations as to agents and advisors, reporting on the performance of those agents, assisting planning applications, analysing the estimated development costs, keeping disposal options under review and assisting in the re-financing of a project.”
Although this description of Wharf’s role carefully reflects that in the PAA under which Wharf was referred to as the Advisor, was limited (by cl 3.2) to acting only as advisor to the Owner, and (by cl 3.3) had no authority to enter into any binding agreement with any party (see paragraphs 44(4) and (5) above), it is instructive nevertheless to see how Mr Barda referred to Wharf’s role in the engagement of professionals.  He referred to Wharf as having “retained the services of a planning consultant” and as having “employed the services” of individuals at Indigo because of their particular expertise in residential planning.  He also refers to other professionals being retained after interview (that is I infer by Wharf) and to Wharf being responsible for managing the payment of the professionals retained.  Thus even though under the PAA the formal position was that Wharf provided advice to SFPL for SFPL to make the final decision, the practical reality was that SFPL was entirely dependent on Wharf’s advice, and it was Wharf who effectively made the decisions and managed the project on a day-to-day basis.  Mr Barda also said that Wharf’s role was “to maximise the value in the land as best we could” (and referred to a particular aspect of the planning strategy as “a prudent exercise for the benefit of investors”).  
134.	 	None of this seems to me the slightest bit surprising.  The whole purpose of the project was to maximise the value for the benefit of SFPL and hence the investors.  Since Wharf’s fee was a share of the profits this would equally benefit Wharf itself, but the project was SFPL’s project, not something that was jointly owned.  SFPL was however entirely in the hands of Wharf for delivery of the project.  Those circumstances – leaving aside Mr Cunningham’s alternative submission that Wharf stepped outside its role as set out in the PAA and acted as agent for SFPL – seem to me to be a paradigm case where a fiduciary duty will be owed.  In the language of Millett LJ in Mothew, Wharf was “someone who has undertaken to act for or on behalf of another in circumstances giving rise to a relationship of trust and confidence”.  In the language of Lord Browne-Wilkinson in White v Jones Wharf had “assumed to act in the property or affairs of another”.  In that of Leggatt LJ in Al Nehayan, Wharf was a person who “[undertook] and [was] entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person” or if not then “where the responsibility undertaken does not directly involve making decisions but involves the giving of advice in a context, for example that of solicitor and client, where the adviser has a substantial degree of power over the other party’s decision-making”.  In my own language from Glenn v Watson, SFPL was “reliant or dependent on [Wharf] to exercise rights or powers, or otherwise act, for the benefit of [SFPL] in circumstances where [SFPL could] reasonably expect [Wharf] to put [SFPL’s] interests first.”  
135.	 	The argument to the contrary was largely based on the express terms of the PAA.  Ms Stevens-Hoare pointed to cl 3.4(a)(i) under which Wharf’s express obligation was to provide the Services “with due skill and care” and submitted that a duty of this type was not a fiduciary duty and was inconsistent with a fiduciary duty in respect of the same service.  She and the other defendants referred me to statements that the courts must be careful not to distort the parties’ contractual bargain by the inappropriate introduction of equitable principles (see Fujitsu v IBM [2014]  EWHC 752 (TCC) at [126] and cases there cited).
136.	 	I do not accept this submission.  It is true that Millett LJ in Mothew made the point that it is inappropriate to refer to duties to exercise proper skill and care as fiduciary duties: see the whole passage from 16C to 18F, particularly at 16F.  That is because fiduciary duties are to be confined to those duties special to fiduciaries, that is duties of loyalty rather than negligence-type duties or duties of competence: hence the servant who does his loyal but incompetent best is not unfaithful or in breach of fiduciary duty (at 18F).  But that does not mean that a person who owes duties of care and skill in relation to a service cannot also be a fiduciary.  To take some very obvious examples, trustees, directors and solicitors, all of whom are undoubtedly fiduciaries, owe duties of care and skill.  Indeed in White v Jones Lord Browne-Willkinson said (at 271E) that where A has assumed responsibility for B’s affairs, A is taken to have assumed certain duties in relation to the conduct of those affairs “including normally a duty of care” (he said much the same thing in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 205, in a passage cited by Millett LJ in Mothew at 16H, where he referred to the “general duty to act with care imposed by law on those who take it upon themselves to act for or advise others”).   But the existence of a duty to act with competence does not seem to me in any way inconsistent with a duty to act with loyalty, even in respect of the very same services.  The duties respond to different concerns.  For example a trustee exercising a power of investment owes a duty of reasonable skill and care (now in fact statutory) because the law expects those investing for the benefit of others to attain a certain level of competence.  If therefore the trustee incompetently invests the trust fund in an imprudent investment, he can be made liable for breach of the duty of care and skill.  But that is not inconsistent with the trustee also owing fiduciary duties, for example the duty not himself to make any undisclosed profit from his trust, which responds to the quite different concern that the law expects trustees not only to serve their beneficiaries competently but also with single-minded loyalty and not to take advantage of their position to benefit themselves.  A trustee who selects a perfectly sensible investment but arranges for a secret commission to be paid to himself is in breach not of the duty of skill and care but of the duty not to make a profit from his trust, an aspect of his fiduciary duty; and the fact that he is also under a duty to act competently does not absolve him from acting loyally.
137.	 	For these reasons I reject the submission that the effect of cl 3.4(a)(i) of the PAA, which refers to Wharf acting with due skill and care, is to negate any fiduciary duty being owed by Wharf.  On the contrary the very fact that Wharf’s obligation is to act with due skill and care “so as to protect and promote the Owner’s best interests and maximise the returns to the Owner” shows precisely why SFPL was entitled to expect Wharf to serve its interests with loyalty.  Similar points can be made about other clauses relied on by the defendants such as the obligation in cl 3.4(b) to “use all reasonable endeavours to protect the interests of the Owner” and that in cl 3.4(d) to “take all reasonable steps to avoid conflicts of interest”.  Neither of these seem to me inconsistent with Wharf owing SFPL duties of loyalty.  It is possible that the effect of the latter is that Wharf would not be in breach of the duty of loyalty if it found, despite taking all reasonable steps to avoid it, that there was a conflict of interest; but I do not see that that is a reason for saying that it was not under any duty of loyalty at all.  
138.	 	In my judgment therefore the effect of the PAA was to require Wharf to act with loyalty in the interests of SFPL, and it operated to impose fiduciary duties on Wharf accordingly.
139.	 	That conclusion makes it unnecessary to consider Mr Cunningham’s alternative submission that Wharf stepped outside the PAA and constituted itself an agent for SFPL, and I do not think that any useful purpose would be served by my doing so.  
Issue (ii) – did Wharf act in breach of fiduciary duty? 
140.	 	Mr Cunningham’s submissions focussed in particular on the events of May and June (characterised by his 12 steps).  But his pleaded case is not confined to that.  It alleges that Wharf “embarked upon a scheme” which included a number of elements.  After alleging that Wharf had de facto control of SFPL it alleges first that Wharf caused SFPL to pursue and fund the pursuit of planning applications and appeals without any regard to the financial resources available to SFPL such that it would have been obvious to Wharf that SFPL would, or was very likely to, run out of money before planning permission was obtained. 
141.	 	Although not abandoned, this allegation was not pursued with any great vigour.  I do not find it established.  On its face it appears to be an allegation that Wharf acted without due care for SFPL’s interests.  An allegation of that kind requires to be established by showing that some specific application was wrongly brought.  No real attempt has been made to do that.  In any event such an allegation, for the reasons explained above, is an allegation of a lack of competence and not an allegation of disloyalty, and hence not within the scope of Wharf’s fiduciary duties at all.  I do not read it as an allegation that Wharf deliberately ran up costs as part of a scheme to see that SFPL ran out of money so that it could be pushed into receivership; that would have been an allegation of disloyalty, but I would not have found that made out on the facts either.  Up until the refusal of the residential application in January 2009, I see no reason to think that Wharf was thinking of anything other than getting the planning permission for the benefit of SFPL as planned.  When that was unexpectedly refused, it made sense for the decision to be appealed: that was as much in SFPL’s interests as in Wharf’s, and I find that it has not been shown that at any stage it was part of Wharf’s thinking in pursuing planning applications or appeals to cause SFPL to run out of money.  As the actual course of events shows, if SFPL were to run out of money it would cause problems for all concerned – for Wharf as much as the investors – and threaten to jeopardise Wharf’s ability to bring the project to a successful conclusion.  It seems to me fanciful to suppose that Wharf ever acted with that intention.  
142.	 	The next allegation is that Wharf caused SFPL to enter into agreements with and/or make payments to Wharf’s associates which were not in the best interests of SFPL.  The only specific example pleaded is the payment to Ultramarine, alleged to be the vehicle for Messrs Maggs, Mellor and Balfour.  For reasons given above (paragraph 61) I have found that Mr Maggs was interested in Ultramarine but cannot properly find that either Mr Balfour or Mr Mellor was.  The Ultramarine payment was in my judgment not a proper payment for SFPL to make, not least because it was contrary to the Articles, and I agree that it was a breach of fiduciary duty by Wharf to get SFPL to pay it.  One of the facets of a fiduciary duty is that the fiduciary “may not act for his own benefit or the benefit of a third person without the principal’s informed consent” (Mothew at 18B) and it was in my view a breach of this duty for Wharf to have procured a payment for the benefit of Mr Maggs without telling SFPL that that was what was happening.  No other examples of similar improper payments have been identified: I have my doubts about the payments to Robert Hook & Co and Riminey Properties, but I have not found that they were improper (see paragraph 62 above), and nothing else specific was relied on.  Mr Cunningham did not seek to establish that the payment to Ultramarine in November 2007 was responsible for the collapse of SFPL in 2009.
143.	 	The remaining allegations concern the steps taken in the period from March to June 2009.  The only pleaded allegations concern (i) the presentation of the winding up petition and (ii) what Wharf said in its letter of 19 June 2009 to the Receivers, but in his submissions Mr Cunningham relied on a number of matters which cumulatively amounted to breaches of duty.  
144.	 	This period begins with Mr Balfour’s “confirmation of war” e-mail on 21 March 2009 (paragraph 88 above), but Mr Cunningham’s complaints really start with Mr Bligh’s meeting with Mr Aimers on 15 May 2009 (paragraph 101 above).  He suggested that Abbey’s sea-change in position at that meeting (from being reasonably relaxed as set out in Mr Aimers’ letter of 9 April 2009 (paragraph 92 above) to wanting immediate rectification of the LTV covenant) was apparently based on Abbey’s concern that the shareholders would not support SFPL, and this information could only have come from Mr Maggs.  I do not make this finding.  I accept that Mr Maggs appears to have been keen to control access to Mr Aimers and to have been quite difficult about arranging for Mr Bligh to meet him, and the way in which he had a pre-meeting with Mr Aimers before Mr Aimers met Mr Bligh (rather than the other way round as Mr Bligh had expected) obviously made Mr Bligh suspicious.  It seems to me however that the change in Mr Aimers’ attitude is readily explicable, and almost certainly prompted, by the Savills valuation.  In his letter of 9 April he had explained that in the light of SFPL’s failure to secure planning permission Savills would undertake a further valuation, and that Abbey’s agreement in principle to extend the facility was subject among other things to “Bank satisfaction in all respects with the Savills report and valuation”.  He was no doubt expecting (because this was what Mr Maggs had been saying) that it would reveal a good prospect of success on appeal and that a successful appeal would boost the valuation such that the LTV problem would go away.  It must have been very disconcerting for Mr Aimers to find that Savills’ valuation was to the effect that even a successful appeal would only increase the open market value from £8m to £10m (paragraph 101 above), as against a loan that already stood at over £14m.  That seems to me to provide more than sufficient reason for Mr Aimers to demand immediate rectification of the LTV breach, and there is no reason to infer that Mr Maggs had encouraged him into it by telling him that the shareholders were reluctant to support SFPL.  
145.	 	Nor do I find that Mr Maggs had any interest at that stage in trying to push SFPL into insolvency.  Rather, I conclude that his concern at that stage was to keep SFPL alive until the appeal could be heard so that Wharf could obtain its share of profits.  I understand why in the light of what later happened Mr Bligh should now be suspicious that Mr Maggs was engineering the situation, but I do not see that it was in Wharf’s interests for Abbey to take precipitate action.  
146.	 	Mr Cunningham also relied on the two letters sent by Wharf to SFPL on 15 May 2009 (paragraph 102 above).  The combined effect of these was to turn Wharf from being a debtor to SFPL in the sum of almost £½m (that is the £495,237 advanced by SFPL to Wharf) to being a creditor of SFPL in the sum of over £¼m.  I infer from the timing that Wharf did this because Mr Maggs was now worried that Abbey would not support the project through to the appeal, and wanted to establish Wharf as a creditor of SFPL; indeed Mr Mellor in oral evidence accepted that by this time he was very fully engaged in the matter, that he was very concerned about the fact that SFPL was without funds, and that he certainly would have taken the view that Wharf needed to establish itself as a creditor.  But the question whether that was disloyal or not depends in my view on whether Wharf genuinely thought it had claims for the money.  As a matter of general law a fiduciary who believes he is owed money by his principal is surely entitled to ask the principal to acknowledge the debt.  I do not see that that can be characterised as disloyal or a breach of fiduciary duty, even if it is against the interests of the principal.  On the other hand to put forward a claim known to be unwarranted might well be thought to be disloyal.   
147.		The next question I think is therefore whether the claims were, or at any rate were thought to be, genuine claims.  I will take the second one first.  This was the sum of £494,460.26.  The background to this was as follows.  In ordinary circumstances SFPL would have made the planning applications in its own name, as it did for example with the mixed scheme in June 2007 (paragraph  52 above).  Had it done so, it seems to me that Wharf would have been entitled under the terms of the PAA to require SFPL to pay the costs of the application (professional fees, application fee and the like), as cl 14 required the Owner (SFPL) to bear the Operating Expenses (which included any fees payable to any Agent, that is a person appointed to perform the Services) (paragraph 44(10) above).  But when it came to the residential planning application, there was a concern that an application by SFPL would put SFPL in breach of covenant (paragraph 71 above).  And it appears that it was for the same reason that rather than fund the costs incurred by WDL directly, the money provided by SFPL to meet the planning costs, which had initially been recorded as a loan from SFPL to WDL, was instead treated as a loan by SFPL to Wharf, and in turn loaned on by Wharf to WDL, to avoid creating a “link” between SFPL and WDL.       
148.	 	This does not however answer the question whether Wharf was entitled to invoice SFPL for the planning costs incurred by WDL.  I did not really receive submissions directed to this point, but I am rather doubtful about it.  WDL itself, which was not a party to the PAA, had no contractual relationship with SFPL.  Wharf’s only contractual relationship with SFPL (apart from the loan to it) was under the PAA.  That (by cl 14) obliged SFPL to bear “the Operating Expenses and any other costs or expenses incurred by the Advisor” (the Advisor being Wharf).  The Operating Expenses as defined included a large number of matters but the only relevant ones which could cover professional fees were:
“(g) 	professional legal, accounting, real estate, conveyancing, consultancy and other administrative fees and expenses incurred by the Owner or the Advisor
…
(i) 	any fees payable to any Agent by the Owner
(j) 	any other reasonable expenses incurred by the Advisor in performing its obligations under this Agreement.”   
But professional fees incurred by WDL are not obviously within these provisions, as they are not incurred, or payable, by the Owner (SFPL) or incurred by the Advisor (Wharf).  Nor is it obvious that sub-paragraph (j), which refers to expenses incurred, was apt to cover a loan from Wharf to WDL as one would not normally describe a loan (carrying a right to repayment) as an expense incurred.  
149.	 	In those circumstances I am far from convinced that Wharf did have a contractual right to payment from SFPL under the PAA of the monies that it had lent to WDL for costs incurred by WDL.  But little thought appears to have been given to the technical position under the PAA.  The application had only been made in the name of WDL because of the perceived problem with SFPL making it in its own name, and I infer that Wharf just assumed that SFPL would be liable to fund the application, and the costs incurred, by WDL in the same way as if this had been done by SFPL itself.  The way in which it was later articulated in a letter of 3 March 2011 from JGR to Wallace (acting for Ludsin) was as follows: 
“[WDL] (as you and your client are aware), was an entity interposed between Hicks Persimmon (the vendors of Sandford Farm) and SFPL, the reason for such interposition being to circumvent a contractual restriction against residential development imposed upon SFPL (the purchaser) by Hicks Persimmon.  The planning process and all attendant development charges and professional costs, including the costs of the applications for change of use and appeal, were therefore routed via [WDL].  [WDL] was a shell company with no purpose other than to obtain the change of use as agent for and for the benefit of SFPL, the owner of the site.  All expenses incurred by [WDL] as agent for and for the benefit of SFPL were therefore paid by [Wharf] and then recharged to SFPL.  We do not believe this is controversial.  It was for the benefit of SFPL.”
That seems to me quite likely to reflect Wharf’s thinking at the time.  It was neither pleaded, nor really argued, that Wharf did not genuinely think it was entitled to invoice SFPL, and I do not think in those circumstances I can find that Wharf knew it was putting forward an unjustified claim.  Mr Cunningham’s point was rather that having asked SFPL to pay the costs, it cannot have been right for Wharf to claim, as it later did, that WDL alone had ownership of the application and appeal and the associated intellectual property.  That is a separate point which I come back to below. 
150.	  Coming to the second letter, this claimed that SFPL owed Wharf the sum of £278,974.48 on the basis that Wharf had paid an instalment of interest to Abbey on SFPL’s behalf.  The arrangement in fact reached between Mr Aimers and Mr Maggs however was that Wharf would put that sum on deposit in a separate cash collateral account earmarked for the quarterly interest due at the end of October (paragraph 77 above).  Abbey did not in the event have recourse to the deposit or treat the interest as paid; instead they capitalised the interest and added it to the principal owed by SFPL.  After the sale by the Receivers to Woodley, Mr Maggs asked for the money back.  Abbey paid back £280,727.85 being the sum of £278,974.48 and interest on the deposit.  In those circumstances I do not think it was accurate to say, as the letter of 15 May 2009 did, that “[Wharf] paid an instalment of interest for the quarter ended 31 October 2008 to Abbey on [SFPL’s] behalf.”  Nor do I see that the circumstances justified Wharf in claiming payment of that sum from SFPL.  Again I received very little in the way of submissions on this point, but my understanding of the position is as follows.  By providing collateral to Abbey Wharf was no doubt in the position of a surety for SFPL and had the usual rights of a surety.  That means that if Abbey had in fact had recourse to the deposit, Wharf could have claimed payment from SFPL, as a surety who pays the principal debtor’s debt is entitled to be indemnified by the principal; and that even before payment Wharf had a right to require SFPL to pay Abbey so as to release its money, as a surety has an equitable right to require the principal debtor to pay the debt.  But a surety who has not in fact paid the creditor does not, as far as I am aware, have any right to immediate payment from the principal debtor.  If he did, it would mean that the principal debtor might find himself liable to pay the surety, and then to pay again when sued by the creditor as payment to the surety could have no effect on the creditor’s claim.  And all of this assumes that SFPL consented to the arrangements – there is in fact no real evidence that the directors of SFPL were asked to consent to this arrangement at all.
151.	 	In those circumstances I do not see that Wharf was entitled to claim the £278,974.48 from SFPL as it did in its letter of 15 May 2009.  Again however it is not specifically pleaded, nor was it really argued, that Wharf claimed the money knowing that the claim was a bad one, and I do not think I should make a specific finding to that effect.  
152.	 	The next step relied on by Mr Cunningham is the meeting early in the week of 1 June 2009 between Wharf and Abbey at which Wharf invited Abbey to appoint an administrator (paragraph 109 above).  The only evidence as to such a meeting is the reference to it in JGR’s letter of 12 June, but there is no reason to doubt that it took place as JGR are unlikely to have referred to it unless it happened.  I received no explanation of what the thinking behind this move was.  But I agree with Mr Cunningham that this is likely to have been prompted by the resignation of the JTC directors of SFPL in favour of those from Vivat on 2 June (paragraph 110 above).  Wharf was not keen on the prospect of the JTC directors being replaced by a new board at the behest of the Majority Shareholders, not least because of the stated intention (in the investors’ letter of 22 May) to renegotiate the agreements with Wharf (paragraph 105 above).  Hence Mr Balfour’s reaction to Wallace’s letter of 28 May, namely his attempt to “stiffen [Mr Burgin’s] resolve”, and his comment that time was running out (paragraph 108 above).  By this stage I consider that it was apparent to Wharf (Messrs Maggs, Mellor and Balfour) that matters were moving towards the endgame.  As early as 18 March the JTC directors of SFPL had told shareholders that SFPL was “unable to meet its financial obligations” and had asked for funds (paragraph 85 above), but the shareholders as a whole had shown a marked reluctance to put in the necessary funds to keep SFPL afloat.  Abbey was worried by the Savills valuation and evidently losing patience and would not wait for ever.  If SFPL was not going to be kept afloat, the obvious outcome would be that Abbey would step in by one means or another – indeed Mr Maggs had told Dr Shadrin back on 4 March that unless the shareholders came up with the necessary funds, Wharf would have to tell Abbey that they could not take the project forward which would undoubtedly lead to the appointment of an administrator or receivers (paragraph 83 above).  The only way to save the project if Abbey stepped in was for a new entity to buy it out of administration or receivership and take it forward.  As Mr Bligh accepted, there were by now in effect two camps, one being the Majority Shareholders and the other Wharf (paragraph 110 above), and both were thinking along the same lines, that is that it was necessary to line up a possible purchaser.  Mr Bligh’s thinking can be seen in the SFPL strategy note he wrote himself on 28 May which included setting up a Newco to acquire the property from Abbey’s receiver (paragraph 107 above); and the thinking in the Wharf camp was similar, with Mr Mellor lining up Evans Randall to make a bid through a new SPV (paragraph 111 above).  In those circumstances I infer that the reason for inviting Abbey to appoint an administrator was to prepare for the Evans Randall bid.  It would be easier for Evans Randall to deal with a receiver or administrator appointed by Abbey (who would only be interested in selling to the highest bidder) than with the new directors of SFPL.    
153.	 	I will come back to the question whether this was disloyal after considering the other matters relied on by Mr Cunningham, but it is apparent that Abbey did not respond to the invitation.  By 4 June Abbey had transferred the file from Mr Aimers in the Corporate Banking Real Estate department to Mr Hamilton in the Corporate Restructuring Department, although Mr Hamilton said that his department had been shadowing the file since the end of May.  On 10 June Abbey served its reservation of rights letter (paragraph 112 above).  At that stage it had not decided to call in the loan. 
154.	 	Then on 11 June Wharf issued the petition to wind up SFPL (paragraph 114 above).  Mr Maggs was asked in his s. 236 examination about the decision to present a petition and said that he did not recall being specifically involved but had a vague recollection that Mr Balfour and Mr Mellor were discussing the remedies.  Mr Mellor was asked (by me) what Wharf hoped to achieve by service of the petition and said:
“I think it was merely to be noticed as a – as a – as a – as a – as – as a creditor.  I – I don’t – I don’t suppose it was any better thought out than that.”        
Mr Balfour’s evidence was that he thought it was a way for Mr Maggs to get his money back, but he could not really explain how issuing the petition would actually achieve that.   I do not find either of these explanations easy to follow and they give rise to a suspicion that I was not being told the real reason for the petition.
155.	 	The petition bears the name of JGR as Wharf’s solicitors with the reference “PGC” which is a reference to Mr Philip Cohen who was the solicitor acting.  It seems likely therefore that it was issued on his advice.  His advice is of course privileged but his thinking can I think be inferred from his letter of 12 June to Mr Aimers (paragraph 115 above).  There he made the point that Abbey were already aware of the petition, that Abbey had already indicated that they would be appointing an administrator and that “As you know, our client … welcomes that move.”  He then said that Wharf had certain proposals to make, which included them having control of the site; and that he understood that the Evans Randall offer was still open, but that it was entirely dependent on Wharf’s continued involvement.  He said that Forsters, who were conducting the appeal for WDL, had unpaid fees but would be prepared to continue the appeal if Wharf’s proposals were acceptable, but if not would be exercising a lien.  He said that the new Board of SFPL could not hope to be in a position to handle the appeal by 23 June, leaving aside the fact that they would not be able to obtain any of the paperwork from Wharf, WDL or Forsters, probably at all but certainly in time for that deadline. 
156.	 	I find that the purpose of the petition was the same as the purpose of inviting Abbey to appoint an administrator, namely to encourage Abbey to put in place an insolvency practitioner whom JGR could persuade to sell the site to Evans Randall (or someone similar) and hence enable Wharf to continue with the appeal.  I do not accept Mr Cunningham’s suggestion that the intention at this stage was for Wharf to buy the site itself: I do not read Mr Cohen’s reference to Wharf having “control” of the site as indicating that Wharf proposed to acquire it itself.  What Wharf was concerned about was being cut out by the new Board of SFPL, and the fear that the site might be sold to someone who had no contractual obligation to Wharf; Wharf’s intention was to try and ensure that the site was taken on by someone who would keep Wharf on, and the petition was, I find, intended to assist in that process by encouraging Abbey to appoint an officeholder to dispose of the site.
157.	 	Was this a breach of fiduciary duty?  In my judgment it was (on both occasions).  Wharf’s fiduciary duty required it to serve SFPL’s interests with single-minded loyalty.  SFPL’s only business was the project of holding the site until planning permission were granted and then realising it.  It was not in SFPL’s interests to encourage its lender to take action which would inevitably lead to SFPL losing the site.  Ms Stevens-Hoare made the point that SFPL was insolvent and that once a company becomes insolvent, the interests of the company are no longer to be regarded as the same as the interests of its shareholders as the interests of creditors intrude: see West Mercia Safetywear Ltd v Dodd [1988] BCLC 250 at 252-3 per Dillon LJ.  That is no doubt so, and directors of an insolvent company who do not have due regard to the interests of creditors may well find themselves in breach of their duties.  But I do not think that means that Wharf, which was not a director of the company, could unilaterally take steps designed to take control of the company’s only asset away from the duly appointed directors.  It was for the directors to decide how to manage the company’s affairs, not for Wharf to do so, and Wharf was not in my judgment acting in the interests of SFPL but in its own interests.       
158.	 	Abbey called in the loan and demanded repayment by letter on 15 June (the next working day) and that afternoon appointed the Receivers (paragraph 116 above).  Mr Cunningham submitted that the obvious inference was that that was prompted by the petition, and was able to point to an e-mail of 19 June from Mr Absolom to Mr Lousada in which he said:
“As explained, Abbey’s decision to appoint Receivers was forced by the fact that a winding up petition had been issued against their borrower.”
Mr Absolom was working for the Receivers not for Abbey, but this represents a near contemporaneous understanding of the position by someone closely involved.  
159.	 	Ms Stevens-Hoare submitted that the petition was not the cause of the appointment of the Receivers, relying on Mr Hamilton’s evidence.  Mr Hamilton in his witness statement said that Mr Cohen’s letter of 12 June did not influence Abbey’s decision to enforce their rights (which I accept), but he also said that Abbey exercised its right to call in the loan in the light of the LTV breach “and the other events of default notified to SFPL, being the payment default and the winding up petition”.  In oral evidence he said he did not think that the petition was the only factor – the other factor was that they had received Mr Bligh’s proposal on 11 June which only offered repayment of £4.5m in respect of a £15m facility (paragraph 113 above).  He repeated that there were two factors, one being the proposal which was insufficient and the second being the winding up order; and then gave a more expanded list of factors namely the proposal they had received from Mr Bligh, the winding up order, the fact that the loan had passed its maturity date, and the fact that there were a lot of issues with the directorship and shareholder disputes.  He also said that he thought that in the light of the various factors he had mentioned (the LTV being in breach for some time, the defaulted interest, the maturity of the loan, the shareholder disputes and the proposal that only paid off a third of the loan) they would have probably have made the same decision even without the petition.  On that evidence, all of which I accept, I find that the presentation of the petition, although not the sole reason why Abbey called in the loan and appointed Receivers, was one of the contributing factors to that decision, but that a similar decision would probably have been made even if there had been no petition.
160.	 	The final matter relied on by Mr Cunningham was Mr Maggs’ letter of 19 June to Mr Absolom (paragraph 118 above).  Mr Cunningham submitted that the reference to a “credible purchaser” was to Wharf’s own SPV (what became Woodley).  I do not think this is right.  I prefer Ms Stevens-Hoare’s submission that at this stage (19 June) Wharf was still hoping that Evans Randall would purchase the land.  It is true that on 17 June Mr Evans had raised a number of questions and complained that everything was at the last minute; but he did not then pull out, and his offer appears to have been made to the Receivers on 18 June; on 20 June Mr Maggs wrote to Mr Kent Gardner (Deputy Chief Executive at Evans Randall) in terms that make it clear that he still expected Evans Randall to pursue the transaction.  Mr Cunningham relied on a draft facility letter from Abbey addressed to Wharf which referred to a facility of £15m for a new SPV to be owned by Wharf and which although dated 26 June had a footer with a date of 18 June and a filename “Heads of Terms (Abbey) 1.3 DOC.pdf” which he suggested showed that the first iteration of this must have been created on 18 June at the latest.  But I accept the explanation that this document was an adaptation of a facility letter previously addressed to Evans Randall, and provides no support for the suggestion that Wharf were planning to acquire the land with their own SPV on 19 June; all it shows is that a draft of the heads of terms for a facility to be granted to Evans Randall had been created by 18 June.  The credible purchaser to whom Mr Maggs referred was one who would come to terms with Wharf, not one owned by Wharf.  
161.	  Mr Cunningham’s other point on this letter was that it contained a misrepresentation by Mr Maggs as to the ownership of the planning application, and that this was designed to, and did, paint the Receivers into a corner and force them to deal with Wharf rather than anyone else.  What Mr Maggs said was that WDL had:
“full ownership of the planning application, the intellectual property supporting both the original application and the forthcoming appeal.”
The allegation of misrepresentation was pleaded but Mr Cunningham said in opening that he thought it was unnecessary for his case, and it was not extensively argued.  But I think I should deal with it.  As JGR’s later letter of 3 March 2011 (paragraph 148 above) referred to, the basis on which the expenses incurred by WDL were recharged by Wharf to SFPL was that WDL had incurred the expenses “as agent for and for the benefit of SFPL” .  On that basis it is difficult to see how WDL could have denied that it held the benefit of the planning application and the appeal, and the intellectual property associated with that, for SFPL.  Indeed when on 20 May 2009 JTC suggested to Mr Murphy that Wharf transfer the shares in WDL to SFPL, Mr Murphy’s response was that he would be happy to recommend this to Wharf’s directors once Wharf and the creditors had been paid.  In other words he did not deny the principle that SFPL should have ownership of WDL, but linked it to payment of the outstanding amounts.  
162.	 	In those circumstances I find that it was indeed misleading for Mr Maggs to say that WDL had full ownership of the planning application and appeal and intellectual property.  The true position was that WDL, having acted for SFPL’s benefit, and having effectively been funded by SFPL, held the benefit of the work it had done for SFPL.   And I also find that it was a breach of Wharf’s fiduciary duty for Mr Maggs to take this stance.  The effect of what he was saying was that the planning appeal, which was crucial to the value of the land, was controlled by Wharf and its subsidiary WDL and not by SFPL.  It must I think be disloyal for a fiduciary in the position of Wharf to claim for itself ownership of something that it ought to have held for its principal.  
163.	 	But I do not accept that it boxed the Receivers in or had any effect on them.  The Receivers’ duty, if they decided to sell, was to sell for the best price reasonably obtainable.  The Receivers initially had an offer from Evans Randall of £15m and two offers from Ashenbury, the cash amounts of which were £4m and £5.05m (paragraph 117 above).  Savills advised the Receivers on the offers and recommended acceptance of the Evans Randall offer as it was above their opinion of market value.  On 22 June the Receivers did so, and told Mr Bligh that they had done so, and after the Evans Randall offer fell through later accepted a similar bid from Wharf’s SPV (Woodley) in its place, also at £15m.  No offer from Ashenbury came anywhere near that.  There is nothing to suggest that the Receivers were constrained to sell to Woodley because of Mr Maggs’ assertion as to Woodley’s ownership of the planning application, and no reason to suppose that that had any effect on their decision at all.  The obvious explanation for why they sold to Woodley was because it was (by some distance) the best offer they had received, and Savills advised that £15m was above their estimate of open market value.  
164.	 	Having considered the various matters relied on by Mr Cunningham I can now state my conclusions on this aspect of the case:
(1)	 	Wharf acted in breach of duty in procuring SFPL to make the payment to Ultramarine, but no attempt was made to establish that this payment caused the collapse of SFPL.
(2)	 	Wharf acted in breach of duty in seeking to persuade Abbey to appoint an administrator and in presenting a petition with the intention of encouraging Abbey to appoint an officeholder.  Nothing came of the former approach, and although the petition was one of the factors which persuaded Abbey to call in the loan and appoint the Receivers, they probably would have done this in any event.
(3)	 	Once the Receivers were appointed, the sale of the land was a matter for the Receivers.  Wharf misrepresented the position to the Receivers in asserting that WDL had full ownership of the planning application, but this had no practical effect.  The Receivers sold the property to Woodley because it was the highest bidder and they were advised to accept an offer at that level.
165.	 	In those circumstances I find that although Wharf acted in breach of duty in the respects I have identified above, Courtwood’s allegation that Wharf procured the disposal of the land at Sandford Farm to Woodley in breach of its duties is not made out.
166.	 	More generally I do not accept that Wharf embarked on a scheme as alleged, if by that is meant that Wharf planned all along to push SFPL into receivership and pick up the property from the receivers.  I find that Wharf only considered buying the property itself once the Evans Randall offer had fallen through, which was on 22 June.  
167.	 	Mr Cunningham made some play of an e-mail sent from Mrs Balfour’s e‑mail address (but probably largely written by Mr Balfour) to Mr Balfour’s brother, the Earl of Balfour, in December 2009.  Included in the e-mail is the following:
“Fettucini and co then tries to buy the deal out of receivership without offering the bank anything, but is out manoeuvred by us who want to save our investment and are prepared to put our money where our mouth is.”
	This was a reference to Mr Capodilista, and the e-mail contains other abusive comments about him and his wife which I need not set out.  None of it puts Mr Balfour (or indeed his wife) in a good light, and Mr Cunningham naturally seized on the words “out manoeuvred”.  But I do not think too much weight can be placed on this very informally written e-mail: the Wharf parties (Messrs Maggs and Mellor and the Balfours) did acquire the property instead of Mr Lisitsin and Mr Capodilista but they did so by offering more money for it.  That can be described as outmanoeuvring without necessarily being an admission of anything underhand.
Issue (iii) – was any property traceable as representing SFPL’s property?
168.	 	This issue, which had been flagged with some prominence in the opening submissions, had almost entirely disappeared by the time of the closing submissions, but Ms Stevens-Hoare said that she was not abandoning it and I should deal with it, although for the reasons which follow, I do not myself think it gives rise to any difficulty, and the defendants were in my view well advised not to make too much of it in closing.
169.	 	There is quite a history to the point.  It appears to have first surfaced at an early stage in the proceedings when Courtwood applied without notice for a proprietary injunction restraining Woodley from dealing with the proceeds of sale and overage.  That came before Hildyard J on 31 July 2015 and it is clear from his unreserved judgment that he thought there were a number of difficulties in the claim which gave him serious pause for thought, although in the end he was persuaded that the claim was sufficiently arguable to justify granting the injunction.  One difficulty that he mentioned very briefly, almost in passing as it were, was that by the time of the sale by the Receivers the only thing that remained in SFPL as mortgagor was the equity of redemption “and there may be difficult problems as to what proprietary claims that could sustain.”
170.	 	Courtwood’s application for the continuation of the injunction to trial eventually came before Asplin J, and was heard by her at a 3-day hearing in April 2016 together with a number of other applications, including applications by a number of the defendants to strike out the Particulars of Claim on the basis that they did not disclose a cause of action, or for summary judgment.  It is apparent from her judgment ([2016] EWHC 1168 (Ch)) that among other things Ms Stevens-Hoare, no doubt picking up what Hildyard J had said, submitted that no property of SFPL passed to Woodley as the only property SFPL had was the equity of redemption which was extinguished by the sale: see at [39]-[49].  It is also apparent that the argument proceeded on both sides on the basis that the sale to Woodley was an exercise of Abbey’s statutory power of sale under s. 101(i) of the Law of Property Act 1925 (“LPA 1925”), and Asplin J’s conclusion that Courtwood’s case was arguable was based on what she understood the effect of the statutory provisions to be.  She did comment that Courtwood’s pleading was vague about what interest was transferred and that it should be given the opportunity to amend, and in its Re-amended Particulars of Claim Courtwood took the opportunity to plead that what Woodley had acquired was “the freehold land at Sandford Farm together with any potential increase in its value as a result of the grant of planning permission”.  I think the latter part of that can be ignored – a potential increase in value is not itself a property right – and that what Courtwood in effect alleged was that Woodley acquired the freehold interest in Sandford Farm.
171.	 	As a matter of fact that seems to me to plainly indisputable.  The effect of the contract of sale by the Receivers was to sell SFPL’s freehold to Woodley, and the completion of the sale by transfer (which I have not in fact seen) no doubt had the effect of transferring the registered estate in the relevant land from SFPL, which was then the registered proprietor, to Woodley.  On the face of it nothing could be simpler than that: Woodley became registered proprietor in place of SFPL and thereby acquired what had previously been SFPL’s property. 
172.	 	What then is the argument that Woodley did not acquire SFPL’s property?  As opened to me it consisted of two propositions.  The first was that the effect of the charge in favour of Abbey was that SFPL’s property interests in Sandford Farm consisted of a bare legal title and an equity of redemption.  The second was that the sale was a sale in exercise of the statutory power of sale conferred on Abbey by s. 101 LPA 1925 and extinguished the equity of redemption.
173.	 	I do not accept either proposition.  SFPL was not a trustee of the land.  It was the sole legal and beneficial owner.  It was no more a trustee of the land than an ordinary purchaser of a house who buys it on mortgage.  Nor do I see anything in the grant of a charge by way of legal mortgage which affects this.  In economic terms, the owner of a freehold which is charged only has a realisable economic interest to the extent that the value of the freehold exceeds the amount secured by the charge; this is what is commonly referred to as his “equity” and if the amount secured by the charge exceeds the value of the land, he is in negative equity or in other words has no realisable economic interest.  In legal terms, however, I do not see that the existence of a charge, whether a charge by way of legal mortgage or any other type of charge, has the effect of depriving him of his full legal and beneficial ownership of the property.  (Indeed I have some doubts about the continuing utility of the concept of the equity of redemption, save as a shorthand label for all the rights that a mortgagor possesses, now that mortgages are universally made by charge rather than by the pre-1926 method of conveying the fee simple to the mortgagee, but I need not pursue this question here).  
174.	  The second proposition, namely that the sale to Woodley was a sale in exercise of Abbey’s statutory power of sale, seems to me simply wrong.  Despite the fact that both sides seem to have approached the argument before Asplin J on this basis (and Courtwood indeed accepted that this was so in answer to a request for further information), it seems with all respect to those concerned to betray an elementary confusion.  Abbey was not a party to the contract of sale at all, and the contract was entered into by SFPL acting by the Receivers.  It was not therefore an exercise of the power of sale conferred on mortgagees by s. 101 LPA 1925 but an exercise of the (non-statutory) power of sale conferred on the Receivers by the legal charge, the Receivers acting, in the usual way, as agents of the mortgagor.  I do not think there is the slightest doubt about this and in those circumstances I do not think I am bound to approach the issue on the basis of Courtwood’s apparent acceptance of the position. 
175.	 	Nor do I myself think there is any difficulty over the effect of the sale by the Receivers.  As agents for SFPL, the Receivers could not pass any better title than SFPL itself could, but SFPL owned the freehold (subject to the charge) and the Receivers sold the freehold on behalf of SFPL in exactly the same way as SFPL could itself have done.  Of course SFPL’s freehold was subject to Abbey’s charge, and if arrangements had not been made to discharge it a purchaser would therefore have taken subject to it; but the Receivers agreed in the contract to provide at completion a discharge of the legal charge in form DS1, and although I have not seen it, there is no reason to suppose that it was not provided.  The purchaser (Woodley) therefore took free of Abbey’s existing charge, although it no doubt replaced it with a new charge in favour of its own lender (who also happened to be Abbey).  In conveyancing terms this is almost exactly what happens when the owner of a house subject to a mortgage sells it to a purchaser who is using his own mortgage to finance the purchase.  At completion the purchaser’s mortgagee advances the money to the purchaser, the purchaser pays the vendor, the vendor pays his mortgagee what is needed to redeem his mortgage, and the vendor’s mortgagee provides a discharge in form DS1 which enables the title to be transferred to the purchaser free of the vendor’s mortgage.  The purchaser does not acquire an equity of redemption: he acquires the full legal and beneficial title to the house and can immediately mortgage it to his own mortgagee.  The only difference between this entirely routine and everyday transaction and what happened here is that the agents selling on behalf of SFPL were the Receivers rather than its directors.  If the directors of SFPL had sold the freehold of Sandford Farm to Woodley (using the proceeds of sale to discharge Abbey’s charge), no-one would dream of denying that what Woodley had acquired was the very same freehold that had been SFPL’s property.  It seems to me that precisely the same follows when it was the Receivers selling SFPL’s property to Woodley.    
176.	 	In those circumstances I have no hesitation in saying that there is nothing in this point and that there was indeed a transfer of SFPL’s property to Woodley.  
Issue (iv) – Brown v Bennett
177.	 	In the light of my conclusion that Wharf’s breaches of duty did not procure the disposal of Sandford Farm to Woodley, the Brown v Bennett point (that is that the sale by the Receivers to Woodley was not itself a breach of trust or breach of fiduciary duty and in those circumstances the defendants cannot be liable for knowing receipt) does not in fact arise.  But I have already said that I accept the defendants’ submission and I should explain why.  
178.	 	In Brown v Bennett [1999] BCC 91 Rattee J was concerned with an application by the plaintiffs for leave to put in an amended statement of claim.  He allowed it in part but refused the plaintiffs leave to bring certain claims, one of which was a claim in knowing receipt, on the grounds that they did not disclose a cause of action.  His judgment was subsequently upheld by the Court of Appeal ([1999] 1 BCLC 649), the only reasoned judgment being that of Morritt LJ (with whom Aldous and Hutchison LJJ agreed).  Although in form an application to amend, it was therefore akin to an application to strike out the proposed claim on the grounds it was unsustainable, and was heard before any of the facts had been found and on the basis of the facts that the plaintiffs proposed to plead.  I will refer to “the facts” of the case in this sense, even though they were at that stage merely allegations and were never proved. 
179.	 	Because Mr Cunningham sought to distinguish the case on its facts, I should refer to them in some detail.  I can take them from the judgment of Morritt LJ.  The plaintiffs, Mr and Mrs Brown, were shareholders in a trading company called Pinecord Ltd.  The first two defendants, two men by the name of Bennett, became directors of Pinecord, and acquired shares in it in return for providing finance.  Pinecord however went into administrative receivership on 24 January 1991.  The receivers advertised the business of the company for sale.  A number of offers were received, and the receivers accepted an offer, subject to contract, from the Bennetts on 13 February 1991.  On 21 February 1991 the Bennetts acquired a company called Oasis Stores Ltd and became its only shareholders and directors.  They then negotiated with outside investors and on 7 March 1991 Oasis’s share capital was increased, the Bennetts (and the fourth defendant, another director of Pinecord called Mr Scott) ending up with about 49%, and the outside investors (through a company called Tuneclass Ltd) the balance, and on the same day Oasis bought Pinecord’s business from the receivers.  Pinecord went into insolvent liquidation, but Oasis’s business prospered and the Bennetts made substantial profits.  
180.	 	The claim was brought by the Browns as assignees from the liquidator of Pinecord.  The foundation of the claim was the Browns’ allegations against the Bennetts, summarised by Morritt LJ as follows (at 652i to 653a):
“the Bennetts either intentionally or recklessly put the company into such financial difficulties that they might increase their share of the equity as a condition for extricating the company from the difficulties they had caused, and/or in order to put the company into administrative receivership with a view thereafter to buying the business from the receiver for the benefit of themselves and their associates.”
That conduct was alleged to have been fraudulent and consisted in part of the Bennetts maintaining expenses at an unaffordable level and refusing to make economies, and:
“finally, but not by any means least, planning the phoenix operation by which the business of the company was acquired by Oasis for the benefit of the Bennetts and their associates.” 
181.	 	The significance of the case for present purposes concerns the claims against Oasis.  Three such claims were sought to be pleaded.  The first of these was a claim to make Oasis liable as constructive trustee for knowing receipt, the claim being based on the fact that Oasis bought the goodwill and assets of Pinecord’s business from the receivers knowing of the Bennetts’ breaches of duty (the Bennetts’ knowledge being imputed to Oasis).  The other two claims were a claim to make Oasis liable as constructive trustee on the basis of dishonest assistance and a claim for damages for conspiracy.  These latter two claims are not directly relevant, but it can be seen that the knowing receipt claim bears quite a close similarity to Courtwood’s claim against Woodley in the current action.
182.	 	Rattee J held that all the proposed claims against Oasis were unsustainable.  So far as the knowing receipt claim is concerned he said this (at 97A-C):
“In the present case the statement of claim pleads no breach of trust, as opposed to a breach of fiduciary duty owed by a director to his company. The only relevant trust suggested at any stage by Mr Oliver was the trust to which a director has been said to be subject in relation to a company's property under the director’s control (see Halsbury’s Laws of England (4th edn), 1996 reissue, Butterworths, vol. 7(1), para. 591). There is no allegation in the amended statement of claim that any of the directors of the company committed any breach of trust in relation to the company's property. Not surprisingly it is not alleged that the sale of the company's assets to Oasis was a breach of any trust in relation to those assets. It was carried out for full value by independent receivers. It cannot therefore be said, consistently with the proposed pleading, that Oasis received any trust property as a result of a breach of trust, so as to have become a constructive trustee of it under the ‘knowing receipt’ limb of the Barnes v Addy formulation.”
183.	 	That was upheld by Morritt LJ.  Having cited the above passage from the judgment of Rattee J he recorded (at 654i-655a) that Mr Oliver (counsel for the Browns):
“frankly accepted that he could not and did not allege that the acquisition of the remains of the business by Oasis from the administrative receivers was itself a breach of trust.  He contended that the judge was wrong because, he said, it was plain that Oasis had the requisite knowledge through the Bennetts as from 21 February 1991 that the breaches of fiduciary duty alleged against the Bennetts gave rise to the sale to Oasis on 7 March, without which it would not have occurred, so that (and this, as I understood it, was the alleged consequence) there was a knowing receipt within the principle because Oasis could not in those circumstances be a bona fide purchaser without notice.”
184.	 	In holding that this was insufficient, Morritt LJ referred first to the statement of Hoffmann LJ in El Ajou v Dollar Land Holdings plc [1994] BCC 143 (“El Ajou”) at 154H where he said that for a claim in knowing receipt:
“the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty” 
Morritt LJ then said (at 655e):
“It is in my view quite plain from that statement of principle (and there are many other similar ones in the books) that the receipt must be the direct consequence of the alleged breach of trust or fiduciary duty of which the recipient is said to have notice.”
That in my judgment represents the ratio of the decision.  The question therefore is what he means by “the direct consequence”. 
185.	 	That I think can be found by collecting together a number of points.  First, since he concludes his consideration of the knowing receipt claim by saying (at 657a) that Rattee J was “entirely right to strike out the allegation of knowing receipt on the grounds that he did”, it is helpful to see what those grounds were.  They can be found in the passage I have cited above.  In effect Rattee J’s decision involves three propositions: (i) this head of constructive trusteeship requires the recipient to have received trust property as a result of a breach of trust; (ii) the only relevant trust was the so-called trust (not of course a true trust) of the company’s assets which directors were subject to, but although there were many allegations that the Bennetts had acted in breach of their fiduciary duties, there was no allegation that they had acted in breach of that trust; and (iii) there was no allegation that the receivers had acted in breach of any trust in selling the assets to Oasis.  Morritt LJ’s endorsement of his decision and of the grounds on which he decided must I think be taken as agreeing with these three propositions.
186.	 	Second, Mr Oliver argued that the statement of Hoffmann LJ in El Ajou that:
“the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty” (emphasis added) 
was not determinative as he was not seeking to define the outer limits of the principle.  Morritt LJ continued (at 655i):
“I agree, but he was expressing the principle in the conventional terms in which it has been expressed on countless occasions over countless years, and no one was able to produce any authority to indicate that the method of expression was not in fact properly used to confine the principle to cases where property is conveyed in breach of trust to the knowing recipient.” (emphasis added)
187.	 	Third, Morritt LJ deals with Mr Oliver’s final point (concerning the corporate opportunity cases) by saying (at 656h): 
“But again, it seems to me that in cases such as that that there is a distribution or a disposal of the property of the company in breach of trust.  At stage 1 the director holds that property as agent for the company.  At stage 2 he purports to hold it himself beneficially.  If that were to be the case, it would involve a distribution of the property to himself in breach of trust, and a dishonest breach of trust at that.” (emphasis added)
188.	 	When these passages are all read together, I find myself left in no real doubt as to what Morritt LJ meant by the receipt being the “direct consequence” of the breach of trust or fiduciary duty.  It is that the disposition itself is in breach of trust or breach of fiduciary duty.  That is what is said in terms in each of the three passages I have highlighted above; and in the second one in particular Morritt LJ is considering expressly whether Hoffmann LJ’s statement was properly used to confine the principle to that, and making the point that there is no authority to suggest that it was not.  
189.	 	Moreover, that is consistent with the grounds of Rattee J’s decision, which Morritt LJ approved.   When Rattee J says that there is no breach of trust pleaded, that is because he is confining the breach of trust to a breach of the trust which a company director has over the company’s assets.  There were plenty of allegations against the Bennetts of breaches of their fiduciary duties as directors, but none of them amounted to an allegation of breach of the trust they were subject to in relation to the company’s property.  It is only a breach of that trust (or a breach of trust by the receivers, which was not suggested) that would give rise to a liability in the recipient as only that would mean that the recipient had received trust property as a result of a breach of trust. 
190.	 	In my judgment therefore the ratio of Brown v Bennett is that it is a prerequisite of a claim in knowing receipt that the disposition to the recipient is “in breach of trust”, that is that the disposition is itself a breach of trust (or breach of fiduciary duty).   It is not enough that the disposition follows, and is caused by, other breaches of trust or fiduciary duty: if it were, it would catch the example given by Morritt LJ at 655f-h of the disposition to a neighbour of a mansion house, as the former trustees’ breach of trust in failing to repair the property did lead to the sale to the neighbour, but Morritt LJ considered that the neighbour would not be liable (despite knowing of the breaches) as the sale itself was not improper.   
191.	 	I can now apply that principle to the facts of the present case.  The relevant disposition is the sale by the receivers to Woodley.  That is not a disposition in breach of trust or fiduciary duty: Wharf did on my findings owe SFPL fiduciary duties but the disposition was not a disposition by Wharf at all, so was not a disposition in breach of fiduciary duty by Wharf.  Just as in Brown v Bennett it was a disposition by the receivers, but there is no allegation that the receivers acted in breach of their duties.  Mr Cunningham has made it clear throughout that he does not suggest that there was any breach of duty by the receivers: see for example the following exchange (from Day 2): 
“Mr Justice Nugee: … you’ve made it very clear, and this is what I understood yesterday, and you’ve not attempted in any way to row back from this, there is no criticism from [sic – this should be “of”] the receivers, there is no allegation, no pleading that the receivers acted in breach of duty.
Mr Cunningham: No, my Lord
Mr Justice Nugee: They acted bona fide and they complied with their duties.
Mr Cunningham: Yes, my Lord.”
192.	 	In those circumstances I remain of the view that I expressed in the judgment I gave on Day 1 that the claim cannot, consistently with Brown v Bennett, succeed as it is not suggested that the receipt by Woodley was the result of a disposal of the Company’s assets in breach of trust or in breach of fiduciary duty.  Just as in Brown v Bennett, there are allegations of breach of fiduciary duty (there against the Bennetts, here against Wharf) which are said to have led, and been designed to lead, to the appointment of receivers, and to the consequent sale to a company associated with those responsible for the breach of fiduciary duty (there Oasis, here Woodley), but no allegation that the disposition itself was a breach of trust.  Indeed one can take the passage cited by Morritt LJ from Rattee J’s judgment and apply it, mutatis mutandis, to the facts of this case, as follows: 
“In the present case the [Particulars of Claim plead] no breach of trust, as opposed to a breach of fiduciary duty owed by [Wharf] to [SFPL]…  There is no allegation in the [Re-amended Particulars of Claim] that [Wharf] committed any breach of trust in relation to [SFPL’s] property.  Not surprisingly it is not alleged that the sale of [SFPL’s land to Woodley] was a breach of any trust in relation to [that asset].  It was carried out … by independent receivers.  It cannot therefore be said, consistently with the … pleading, that [Woodley] received any trust property as a result of a breach of trust, so as to have become a constructive trustee of it under the “knowing receipt” limb of the Barnes v Addy formulation.” 
(That omits the reference to the receivers selling for full value, which is a point I revert to below).
193.	 	In closing Mr Cunningham sought to distinguish Brown v Bennett on its facts.  He relied on a number of differences, the first of which was that there the receivers had advertised the business for sale on the open market, whereas here it is said that the effect of the petition and the 12 and 19 June letters was to preclude anyone else than Woodley from being the ultimate recipient.  In fact I have found that the reason the receivers sold to Woodley was not because of the letters of 12 and 19 June, but because Woodley made the highest offer.  But in any event I do not see that it makes any difference.  The relevant disposition was the sale by the receivers.  It is not said that that disposition was in breach of duty.  That in my judgment is fatal to the claim succeeding.
194.	 	Second, Mr Cunningham said that in Brown v Bennett the majority shareholder in Oasis was by the time of the purchase Tuneclass, which represented the outside investors against whom no complaint was made, whereas here Courtwood’s claim was against the very people (Messrs Maggs, Mellor and Balfour) who were the individuals behind Wharf.  It is true that Rattee J refers to the fact that there were numerous people involved in Oasis other than the defendants (at 97H).   But this is not part of his reasoning for rejecting the knowing receipt claim.  It is part of his answer to Mr Oliver’s appeal to the merits.  I do not see in either Rattee J’s judgment or, more significantly, in Morritt LJ’s judgment, any consideration of the make-up of Oasis at the point of purchase in deciding that the claim in knowing receipt did not lie.
195.	 	Third, Mr Cunningham pointed to the fact that in Brown v Bennett Rattee J did refer to full value having been paid for the property, and said that was not clearly the position here.  Again I do not see that this makes any relevant difference.  Rattee J’s reference to the receivers selling at full value is part of his explanation why there is no suggestion that the sale by the receivers was a breach of trust.  Since there is no suggestion of a breach of trust by the receivers in the present case either, the question of whether there was full value or not does not affect this point.
196.	 	Mr Cunningham also referred to the fact that under the contract of sale Woodley only paid a deposit of £1 so that if planning permission had not been obtained and Woodley had not completed, neither Woodley nor those who were behind it would have lost anything.  That may well be so (the guarantee to be entered into by Messrs Maggs, Mellor and Balfour (and in fact entered into by Messrs Maggs and Mellor and Mrs Balfour) was not entered into until completion and was in any event not a guarantee of Woodley’s obligation to pay the purchase price to the Receivers but a guarantee of Woodley’s obligations to repay Abbey under the intended facility letter and if Woodley had not completed would no doubt not have been executed).  But I do not see how this affects the question.  
197.	 	Mr Cunningham’s fourth point of distinction is this.  Morritt LJ after referring to the judgment of Peter Gibson LJ in Baden’s case, said (at 656f-g) that it: 
“says nothing about the imposition of a constructive trust and the application of the knowing receipt principle to one who, as is admitted in this case, acquired the property bone [sic] fide under a purchase with independent fiduciary sellers, namely the administrative receivers.”
By contrast, Mr Cunningham said, in the present case the acquisition was not bona fide; the acquisition was the completion of the scheme to engineer the appointment of the receivers and the sale itself.   
198.	 	I have had some difficulty understanding why Morritt LJ referred to Oasis as having admittedly acquired the property bona fide.  The difficulty arises from the fact that on the facts alleged in Brown v Bennett, the Bennetts were directors of Oasis at the time that it acquired the assets and their knowledge was therefore attributable to Oasis.  That was Mr Oliver’s point, and in the passage I have cited (paragraph 182 above) Morritt LJ records his contention that in those circumstances Oasis could not be a bona fide purchaser without notice. The Bennetts were accused of having planned a dishonest scheme the end stage of which was the acquisition by Oasis of the company’s assets.  It is not easy to see why that was any different from, or more bona fide, than Courtwood’s allegations against the Defendants here.  Mr Robinson suggested that what Morritt LJ was referring to was Mr Oliver’s acceptance (at 654i) that he could not and did not allege that “the acquisition of the remains of the business by Oasis from the administrative receivers was itself a breach of trust”.  That may well be right, but it is still odd that Morritt LJ referred to Oasis as admittedly acquiring the property bona fide when its bona fides appears to have been very much in question.  It is possible that what Morritt LJ had in mind instead was the point that Oasis was not itself responsible for the breaches of duty which had all taken place before it came onto the scene.  If that is so, the same can be said of Woodley which was only incorporated on the day contracts for the sale were exchanged – it no doubt had knowledge, through its directors, of what had happened before it was incorporated, just as Oasis knew, through the Bennetts, what the Bennetts had done, but it was not itself responsible for those things.   
199.	 	Be that as it may, I come back to the question whether this makes a difference.  On my analysis of the ratio of Brown v Bennett, the critical question is whether the disposition under which Woodley acquired the property was in breach of trust.  That seems to me to focus on the disposer not on the acquirer.  Mr Cunningham submitted that in order for the transaction to be valid, both the disposition and the acquisition have to be bona fide.  But I do not see how this works as a matter of principle.  Woodley was not a fiduciary for SFPL and owed it no duties.  The Receivers did owe SFPL duties (of a limited nature) in disposing of the property but admittedly acted bona fide and were not in breach of their duties.  It seems to me to follow that the disposition by the Receivers was valid and cannot be impugned – indeed Mr Cunningham said in terms that he was not impugning the transaction.   But if he was not impugning the transaction, I do not see how the receipt by Woodley can be said to have been one where the property was conveyed to it in breach of trust. 
200.	 	Mr Cunningham also made an appeal to the merits, saying that it cannot be right that the law does not provide a remedy simply because the defendants have been astute enough to interpose receivers to act bona fide between SFPL and Woodley.  There are a number of answers to that.  First, it is not that the law does not provide a remedy for what Courtwood alleged.  The primary remedy is a claim for breach of fiduciary duty against Wharf; such a claim has not been pursued but that is because of Wharf’s insolvency.  That does not mean the law does not provide a remedy, only that the remedy it provides has in this case proved worthless.  Second, if it could be shown that a dishonest scheme was entered into, a claim for dishonest assistance would no doubt lie against anyone assisting in the scheme and knowing of the facts that made it dishonest.  But no claim for dishonest assistance was brought in this case and Mr Cunningham made it clear in closing that he did not allege dishonesty.  Third, a scheme that depended on duping an innocent third party into disposing of property might well give rise to claims of fraudulent misrepresentation, and a disposition induced by a fraud is one that could in principle be avoided; there is authority that a recipient under a transaction that was induced by fraud and that has been avoided can be made liable as a constructive trustee.  But again that is not the claim that has been brought; the claim that has been brought has been squarely pleaded as knowing receipt following a breach of fiduciary duty, and for the reasons I have sought to give that does not seem to me to be well founded unless the disposition under which the recipient received the property is itself a breach of trust, which has never been suggested here.       
201.	 	The view I have reached as to the ratio of Brown v Bennett does not seem to me to be heterodox.  I dealt with this in my judgment on Day 1, and it is simplest to incorporate the relevant passage from that judgment as follows:
“57.  	I should say that the conclusion I have come to seems to me to be not only mandated by Brown v Bennett, but one which, as I understand it, does accord with the underlying principles in relation to this particular head of liability. 
58.  	The claim for knowing receipt is not, as I understand it, a claim which is designed to strip people who have behaved badly of profits.  There is a claim against non-trustees, strangers to the trust, as they are called, to make them constructive trustees, if they can be shown to have dishonestly assisted in a breach of trust, and there is ample authority which extends such liability to those who have dishonestly assisted in a breach of fiduciary duty.  But as I have said, that is not the claim pleaded here. 
59. 	The foundation of the claim in knowing receipt seems to me quite different.  It is that a person has got their hands on property which belongs to somebody else, in this case [SFPL].  If that is the analysis – and I read a short passage from Lord Sumption’s judgment in Williams [ie Williams v Central Bank of Nigeria [2014] UKSC 10 at [31] “The essence of a liability to account on the footing of knowing receipt is that the defendant has accepted trust assets knowing that they were transferred to him in breach of trust and that he had no right to receive them…His sole obligation of any practical significance is to restore the assets immediately.”] which suggests, when dealing with a limitation point, that that was the analysis that he adopted, because he said that the obligation of the recipient was to restore the assets immediately – the  foundation of that is that the assets do not belong in equity to the recipient; and the foundation of the fact that the assets do not belong to the recipient in equity is that the transfer by which the assets were transferred is a flawed transfer.  It may be a voidable transfer, it may indeed, for example if a company’s assets are disposed of in a way that is ultra vires, be an entirely void transfer.  But what gives the equity to the claimants is not the knowledge of the defendants by itself, or antecedent breaches of duty, but the fact that the transaction which is impugned is not one which transfers a good title to the recipient.  It is in those circumstances that the recipient, unless a bona fide purchaser for value without notice, is liable, if he still has the property, to give it back, and can be made liable to account as constructive trustee, whether he still has the property or not, if he received it in circumstances that make his receipt unconscionable. 
60. 	I should also say that it seems to me that the conclusion that I have come to is entirely orthodox.  I took the opportunity, although I have not shown this to counsel, but I do not think they are disadvantaged thereby, to see how it is put in the most recent edition of Lewin on Trusts, which is the 19th edition (2015).  Lewin deals with knowing receipt in an extended passage in chapter 42 at paragraphs 42-022 onwards, and sets out at 42-023 the general requirements of liability for knowing receipt, the third of which is that: 
 “The transfer is in breach of trust.” 
That is then expanded on at 42-044 where the editors say: 
“It must be established that the property subject to a trust or other fiduciary relationship has been transferred in breach of trust, though it does not matter whether the breach is fraudulent.”
Then they say: 
“A breach of trust is usually essential because it is the basis on which the beneficial title is retained by the beneficiaries and does not pass to the recipient.  If the beneficial title does pass to the recipient there is no occasion for the imposition of liability in equity on the recipient under the knowing receipt head of constructive trusteeship.”
 And at 42-045:
“It is the transfer itself which must be in breach of trust and it is not enough that the transfer was made following the occurrence of a breach of trust, for in such a case the transfer itself would be valid in equity and involve no breach of trust, and so would pass equitable title to the recipient.”
Then they cite the example given by Morritt LJ of the mansion house being allowed to fall into disrepair in Brown v Bennett.  Then at 42-048 they deal with breach of trust by company directors saying:
“A breach of fiduciary duty by company directors will generally suffice to found liability for knowing receipt.” 
61. 	It does seem to me, therefore, that the view I have come to – that what Brown v Bennett is authority for is that the transfer itself must be an impugned transaction on the grounds it is a breach of fiduciary duty or trust, and not that it follows an antecedent breach of trust or fiduciary duty – is both the orthodox analysis and explicable on the grounds that the editors of Lewin on Trusts explain it, namely that it is that which makes the beneficial title retained by the beneficiaries and not pass to the recipient.  And if the transfer itself cannot be impugned, there is no occasion for the imposition of liability under this head of constructive trusteeship.”  
202.	 	I remain of the same view.  Mr Robinson also showed me a passage in the judgment of Spigelman CJ in the New South Wales Court of Appeal in Evans v European Bank [2004] NSWCA 82 at [160]-[161] which was to the same effect and which collected together a number of citations, as follows:
“160 	In my opinion, it is an essential aspect of accessorial liability for ‘knowing receipt’ that the act of transfer of the property – relevantly the deposit by Benford with the Respondent – must be in breach of a fiduciary obligation. The claim arises in equity’s exclusive jurisdiction and does not give rise to the apparent difference between English and Australian law as to whether tracing in equity requires a pre-existing fiduciary relation. (See e.g. Agip (Africa) Limited v Jackson [1990] Ch 265 at 290B; Agip (Africa) Limited v Jackson [1991] Ch 547 at 566H-567A; Boscawen v Bajwa [1995] EWCA Civ 15; [1996] 1 WLR 328 at 335G and cf Black v S Freedman & Co [1910] HCA 58;(1910) 12 CLR 105; R P Meagher and W M C Gummow, Jacobs’ Law of Trusts in Australia (6th ed, 1997) par [2706]; R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow & Lehane’s Equity, Doctrines & Remedies (4th ed, 2002) at [5-025], [5-230].)
161	This proposition has been variously expressed in the authorities:
•	“there must ... be some misapplication, some breach of trust”: Gray v Johnston (1868) LR 3 HL 1 at 11.
•	“the payment is being made in fraud of a third person”: Thomson v Clydesdale Bank Limited [1893] AC 282 at 287-288. 
•	“the money is being applied in breach of trust”: Coleman v Bucks and Oxon Union Bank [1897] 2 Ch 243 at 250, 254. 
•	“misapplied funds”: Belmont Finance Co v Williams Furniture Ltd [1980] 1 All ER 393 at 405. 
•	“the transfer to him was a breach of trust”: Agip (Africa) Limited v Jackson [1990] Ch 265 at 291G. See also Lipkin Gorman v Karpnale Limited [1987] 1 WLR 987 at 1006B. 
•	“a disposal of his assets in breach of fiduciary duty” (El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 at 700; Bank of Credit and Commerce International (Overseas) Limited v Akindele [2001] Ch 437 at 448. 
•	trust money was “misapplied”. See El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 at 739-740; Polly Peck International plc v Nadir [1992] EWCA Civ 3; [1992] 4 All ER 769 at 777; Koorootang Nominees Pty Ltd v ANZ Banking Group Limited [1998] 3 VR 16 at 105, line 35.” 
It can be seen that this is all in line with the views I have expressed.
203.	 	In my judgment therefore even if I had been persuaded that Wharf had procured the disposal to Woodley by breaches of fiduciary duty, it would be fatal to the claims that it had not been suggested that the transfer itself was a breach of trust.	 
Issue (v) – what, if anything, did each defendant receive?
204.	 	The conclusions I have come to so far make it unnecessary to answer this question.  The basic facts are not in dispute: Woodley received the proceeds of the sale to Taylor Wimpey, including the overage; and the proceeds were distributed to the participants in Woodley, that is Mr Maggs through his company Night Rhythm, Mr Mellor through his company Tamadot and Mrs Balfour through her company Woodcock (which replaced Kingfisher).  But the detail is inevitably far more complex than that, and in certain respects it is still obscure precisely what happened to all the money.  Mr Mellor also gave some curious evidence about his entitlement to the overage which has been frozen, which appeared to depend on the exercise of a discretion by some trustees but of which he expected to be a very substantial beneficiary, although possibly not the only beneficiary.  But I do not see that any useful purpose would be served by my seeking to describe or unravel all the intricacies, and I do not propose to do so.  It is quite apparent that if the claim had otherwise been established there would in any event have had to be accounts and inquiries to ascertain the precise position.
205.	 	I will however briefly address the position of Mr Balfour.  Although it had originally been intended that he should participate in Woodley, and be one of the guarantors, in the event, as referred to above, his wife took his place.  Mr Balfour’s evidence was that was because he did not have the financial ability to participate but his wife did.  She was the one who gave the guarantee and she was the one who owned first Kingfisher and then Woodcock.  Mr Cunningham nevertheless claimed that Mr Balfour was liable for knowing receipt.  In closing he said that Mr Balfour’s receipt “centres for now” around a sum of £400,000 which was paid in August 2010.  He relied on an e-mail from Mr Mellor in July 2011 to Mr Balfour which referred to “[assistance] which materially benefited you last summer to the tune of at least £400 thousand”, and said that showed that Mr Mellor thought it had been paid to Mr Balfour.  Although taken in isolation that phrase might suggest that, the e‑mail as a whole does not seek to distinguish between Mr Balfour and his wife, referring for example to “your/Svea’s representatives” and “you/Svea”, and in oral evidence Mr Mellor said that he was referring to the Balfours as an entity and was not privy to the arrangements between Mr Balfour and his wife.  That seems to me entirely understandable and I do not think Mr Mellor’s e‑mail is any evidence that Mr Balfour received the £400,000.  Mr Balfour denied having done so, and the documentary evidence shows that it was sent to Mrs Balfour’s account.  I do not think there is any basis for concluding that it was paid to Mr Balfour.    
206.	 	Mr Cunningham had two further submissions as to why Mr Balfour might nevertheless have received some of the money.  One was that it was impossible to know what financial dealings there might have been between Mr Balfour and his wife; the other was that Courtwood’s legal team had been unable to identify where all the money went, and that some of the missing money might have ended up in Mr Balfour’s pocket.  I agree that neither possibility can be ruled out, but both seem to me to be speculative.  There is in my judgment no actual evidence before me of receipt by Mr Balfour of any of the proceeds of sale at all.  
Issue (vi) – did the defendants have the requisite knowledge?
207.	 	My conclusions also make it unnecessary to consider this issue.  What is required to make the recipient liable is that the recipient’s state of knowledge should make it unconscionable for him to retain the benefit of the receipt (BCCI v Akindele [2001] Ch 437 at 455), but in the words of Hoffmann LJ in El Ajou at 154H, the requisite knowledge is “knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty”.  In circumstances where I have held that the receipt of the assets was not traceable to a breach of fiduciary duty, logically none of the recipients could have had that knowledge, and I do not think that it would be profitable for me to try and identify what knowledge they did in fact have.   I do not therefore propose to consider this question.
Conclusion
208.	 	For the reasons I have given the claims in knowing receipt in my judgment fail.  In terms of the particular defendants:
(1)	 	The claims against the represented defendants (Mr Mellor and the other Mellor defendants (Woodley, Tamadot, Charlestown and Chateau); Mr Balfour; Mrs Balfour, Kingfisher and Woodcock) are dismissed for the reasons I have given.  
(2)		The claims against Mr Maggs and Night Rhythm are claims for judgment in default of defence which were adjourned to the trial.  In circumstances where Courtwood has failed at trial to establish the necessary elements of its claims, it seems to me that those claims must be dismissed as well, notwithstanding the fact that these defendants are in default of defence.   
(3)	 	I did not understand any claim to be pursued against Wharf (see paragraph 5 above).  In any event the only relief ever claimed against it was a declaration that it had procured the disposal of the freehold land at Sandford Farm to Woodley in breach of its fiduciary duty, and for the reasons I have given Courtwood has not made that good.  
In those circumstances I will dismiss the action.