Deane & Ors v Coutts & Co & Anor, Court of Appeal - Chancery Division, July 05, 2018, [2018] EWHC 1657 (Ch)

Resolution Date:July 05, 2018
Issuing Organization:Chancery Division
Actores:Deane & Ors v Coutts & Co & Anor
 
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Neutral Citation Number: [2018] EWHC 1657 (Ch)

Case No: HC-2017-000507

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Rolls Building, Fetter Lane,

London EC4A 1NL

Date: 05/07/2018

Before:

CHIEF MASTER MARSH

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Between:

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David McIlroy and Darragh Connell (instructed by Elborne Mitchell LLP) for the Claimants

Adam Temple (instructed by TLT LLP) for the Defendants

Hearing dates: 20 and 21 March 2018

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CHIEF MASTER MARSH:

  1. The claimants are all former professional footballers. In 2004, they each invested in a commercial property development in Spain, called Monte Resina, by purchasing an apartment. The claimants' financial adviser was a firm called Kingsbridge Asset Management Limited (``Kingsbridge''). David McKee and Kevin McMenamin were the individual advisers they dealt with. Both the first defendant (``Coutts'') and The Royal Bank of Scotland (Gibraltar) Limited (``RBS Gibraltar'') lent money to the claimants to assist them in the purchase of the apartments. RBS Gibraltar is not a party to this claim.

  2. It is necessary to distinguish RBS Gibraltar, which lent money to the claimants and the second defendant (``RBS''). Coutts, RBS Gibraltar and RBS were, at the relevant time, direct or indirect subsidiaries of The Royal Bank of Scotland Group plc. RBS is joined as second defendant because RBS Gibraltar's lending book was assigned to RBS (after various intermediate assignments). RBS is said to be liable ``as successor in title to RBS Gibraltar''. It is common ground that RBS had no dealings with the claimants and where RBS is referred to in setting out the loan history, the reference can only be to RBS Gibraltar.

  3. The claimants' case is summarised in paragraph 3 of the particulars of claim:

    ``In 2004, David McKee and Kevin McMenamin, acting within the scope of their apparent authority from Kingsbridge, induced the Claimants, two other professional footballers and one football manager, to purchase apartments at Monte Resina, Marbella, Spain (``Monte Resina''). The said inducement occurred because of the undue influence exercised by David McKee and Kevin McMenamin over the Claimants, and or because of breaches of trust and fiduciary duty by David McKee and Kevin McMenamin and or because of fraudulent misrepresentations by David McKee and Kevin McMenamin. Coutts and RBS are liable to the Claimants because Coutts or RBS were in a joint enterprise with David McKee and Kevin McMemamin in promoting Monte Resina to the Claimants, or because David McKee and Kevin McMenamin were acting as Coutts' and or RBS' agents for the purposes of arranging the loans to enable the Claimants to purchase the Monte Resina apartments, or because Coutts and RBS were on notice of David McKee and Kevin McMenamin's undue influence and or breaches of trust and of [sic] fiduciary duty and or fraudulent misrepresentations.''

  4. The claim seeks to establish secondary liability against the defendants on three grounds:

    (1) Coutts and RBS Gibraltar were in a ``joint enterprise'' with Mr McKee and Mr McMenamin.

    (2) Mr McKee and Mr McMenamin acted as agent for Coutts and RBS Gibraltar.

    (3) Coutts and RBS Gibraltar were on notice of wrongful acts by Mr McKee and Mr McMenamin.

  5. The claim for equitable compensation and/or damages is set out under a number of headings for each claimant. The principal claims are for:

    (1) The proportion of the purchase price paid away by Mr McKee and Mr McMenamin.

    (2) The claimants' loss on the sale of the apartment.

    (3) Interest paid on the Coutts loan.

    (4) Interest paid on the RBS Gibraltar loan.

    (5) The full amount borrowed from Coutts Finance Co.

    (6) Maintenance and service charges paid in respect of the apartment.

  6. This judgment follows the hearing of two applications. First in time was the defendants' application to strike out the whole of the claim pursuant to CPR 3.4(2)(a) on the basis that no reasonable grounds for bringing the claim are made out in the particulars of claim and/or pursuant to CPR 24.2 on the grounds that the claim has no real prospect of success and there is no compelling reason why it should be tried. Secondly, the claimants applied for permission to amend the particulars of claim.

  7. The jurisprudence that lies behind the defendants' application is well-understood. So far as strike out is concerned, the primary focus is on the statement of case, either as to the manner in which it is drafted or the propositions of law that underpin it (or both). The defendants have to show that the claim, as it is set out in the statement of case, is bound to fail. The court may give the respondent an opportunity to cure any defects and, as here, the making of an application to strike out the claim will sometimes prompt an application for permission to amend. The hearing proceeded on the basis that the court would determine both applications together.

  8. Guidance about the correct approach to applications under CPR 24.2 can be found in a number of sources. I have particularly in mind the helpful summary of the principles provided by Lewison J (as he then was) in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) (approved by the Court of Appeal in A C Ward & Son v Caitlin (Five) Limited [2009] EWCA (Civ) 1098). It is unnecessary to set out the principles in this judgment. I would only remark that the risk of conducting a mini-trial is all too apparent where, as here, the claimants have provided a substantial body of evidence in their witness statements. For the purposes of the application, the defendants accept the facts as they are pleaded. It is, however, the claimants' case that, if the claim proceeds, disclosure by the defendants is likely to reveal information that is helpful to their case and they are critical of the defendants (i) for having been slow to provide information and relevant documents and (ii) for having redacted documents supplied to the claimants to an unreasonable and unnecessary degree.

  9. The principal evidence supporting the applicant is provided in the careful and measured statement made by Andrew Lyon, a solicitor with TLT LLP, based on instructions and on a review of the documents. Each of the claimants has made a full statement in response. The fourth claimant, Mr Wilcox, has filed a particularly lengthy statement running to 150 paragraphs. Much of it deals with matters about which he has no knowledge (the claimants' lack of knowledge about the dishonest activities of Mr McKee and Mr McMenamin is an important element of the claim) and it includes lengthy quotations from documents and comment. Such an approach to the drafting of witness statements is both inappropriate and unhelpful. The statement lacks focus on the issues for determination by the court on the defendants' application and his commentary is largely tendentious and unnecessary. The volume of evidence the claimants have provided is clearly designed to emphasise the unknowns. The claimants' approach compares unfavourably with that of the defendants which was carefully directed to the case put forward by the claimants in their particulars of claim.

  10. At the material time, Mr Ian Turland was a relationship manager with Coutts, having worked for Coutts since 1983. He has provided a witness statement principally to deal with allegations that are made against him in the draft amended particulars of claim (``the amended claim''). His statement focuses on the new allegation that is made in the draft amended claim that he dishonestly assisted Mr McKee and Mr McMenamin in their breach of fiduciary duty and/or breach of trust. The claimants say that Mr Turland's statement fails to grapple with their case and is an example of the defendants' refusal to provide a full response to their case.

    Background

  11. The defendants retained their apartments until after the collapse in the Spanish property market in late 2009 and the apartments were ultimately sold in 2013 for substantially less than the purchase price. In April 2010, the claimants issued proceedings against Kingsbridge seeking damages for negligence, breach of contract and breach of fiduciary duty in respect of claims arising out of their investment in Monte Resina. On 14 September 2010, Kingsbridge went into liquidation and the claimants obtained judgment in default with damages to be assessed. In September 2011 they each obtained judgment for sums ranging between £814,416 and £1,050,698.

  12. They then pursued proceedings against Kingsbridge's professional indemnity insurers, Aspen Insurance UK Limited (``Aspen''). In July 2012, Aspen filed a defence denying liability on the basis that the claims arose out of the dishonest, fraudulent or criminal acts or omissions of Kingsbridge, Mr McKee and Mr McMenamin. They are referred to collectively in the particulars of claim as ``the Original Defendants'' and I will use that description in the same way. For the purposes of this claim, the claimants adopt a lengthy extract from Aspen's defence as the basis for their claim that the Original Defendants exercised undue influence, acted in breach of trust and fiduciary duty and made fraudulent misrepresentations. The application before me proceeded on the basis that the conduct complained of may be presumed to be true. The facts as summarised in this judgment are based upon that extract from the Aspen defence and supplemented by the documents to which reference was made at the hearing.

  13. Kingsbridge was an IFA specialising in the provision of investment services to sportspersons, including footballers. It was a subsidiary of Proactive Sports Group plc (``Proactive''). Mr McKee and Mr McMenamin, as well as acting as advisors for Kingsbridge, became interested in ventures outside their normal sphere of interest. They explained their wider interests in a letter written to their accountant on 7 April 2004:

    ``As...

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