Cullen Investments Ltd & Ors v Brown & Ors, Court of Appeal - Chancery Division, July 05, 2017, [2017] EWHC 1586 (Ch)

Resolution Date:July 05, 2017
Issuing Organization:Chancery Division
Actores:Cullen Investments Ltd & Ors v Brown & Ors

Neutral Citation Number: [2017] EWHC 1586 (Ch)

Case No: HC2014-001021



Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 05/07/2017

Before :

The Honourable Mr Justice Barling

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Between :

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Timothy Collingwood (instructed by Grosvenor Law) for the Claimants

Edward Davies QC (instructed by Blacklion Law LLP) for the Defendants

Hearing dates: 21 October 2016 (reading), October 24, 25, 26, 27, 28, and 31; November 1, 2, 3, 4, 7, 10 (reading), and 11.

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Judgment Approved direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.






Mr Justice Barling:


  1. These consolidated proceedings, seeking an account, damages and other relief, have been brought in the wake of the breakdown of a business relationship between the Second Claimant, Mr Eric Watson (``Eric'' For convenience I use the first names Eric, Julian and Quentin throughout the judgment. No disrespect is intended.) and the First Defendant, Mr Julian Brown (``Julian''), which had been built on a friendship between the two men.

  2. Eric is the founder and executive chairman of the First and Third Claimant, Cullen Investments Limited ("Cullen"). Cullen is a private investment company incorporated in New Zealand.

  3. The Second Defendant, Mr Quentin Brown (``Quentin''), is Julian's brother, and worked alongside Julian in the business to which the proceedings relate.

  4. The Third Defendant, Kauri Investments Limited ("KIL"), was incorporated in England on 22 March 2005 as the corporate vehicle for a joint venture which had been agreed between Eric/Cullen and Julian (``the JV''). Cullen and Julian are 50:50 beneficial owners of KIL, whose directors were Julian, Quentin and Eric. Julian was the CEO and an employee of KIL until mid-2012.

  5. The breakdown in the relationship occurred as a result of Julian making a personal investment in a joint venture with a partner in Germany, Mr Hagen Kahmann (``Mr Kahmann''). This venture involved the establishment of a Berlin-based property management company and the redevelopment of residential sites in Germany, particularly in Berlin. The German joint venture was described during the trial as ``the German Opportunity''.

  6. In these proceedings Eric and Cullen contend that Julian's personal investment in the German Opportunity was impermissible under the terms of his contractual relationship with Cullen/Eric, and/or constituted or resulted in a breach of Julian's and Quentin's obligations as directors of KIL and/or a breach of fiduciary duty owed by Julian to Eric/Cullen. It is also alleged that Julian and Quentin are guilty of an unlawful means conspiracy. The claims are disputed by the Defendants.

    The legal proceedings

  7. On 13 March 2013 Cullen issued a claim in the Queen's Bench Division against Julian alone (``the QBD claim''), to which Julian filed a defence on 12 June 2013.

  8. On 22 November 2013 there was a board meeting of KIL, called by Eric to consider whether KIL should commence proceedings against Julian. Julian and Quentin voted against such proceedings, and on 21 July 2014 Cullen commenced derivative proceedings in this Division against Julian and Quentin on behalf of KIL. Eric was also a claimant in those proceedings in his personal capacity.

  9. The QBD claim was transferred to this Division on 12 August 2014. Following a hearing on 15 and 16 January 2015 before Mr Mark Anderson QC, sitting as a Deputy Judge of the High Court, by orders dated 27 February 2015, permission was granted to continue the derivative action, to amend the QBD claim to add Quentin as a defendant, and to consolidate the various proceedings.

  10. The final position is therefore that there are claims by Cullen and by Eric against both Defendants, and a derivative claim by Cullen against both Defendants.

    The evidence

  11. More than 2,200 pages of written material were introduced in evidence. In addition, six witnesses were called to give evidence on behalf of the Claimants, and both the Defendants also gave evidence. The following paragraphs contain a short account of the scope of each of the witnesses' evidence.

  12. Eric John Watson: Eric, the Second Claimant, is the founder, executive chairman, de facto controller and/or beneficial owner of Cullen, through a private trust. He provided a witness statement and was cross-examined over three days. I consider that he was an honest witness. However, his evidence was surprisingly vague at times, even allowing for the passage of time. It was clear that he was generally content to leave the detail of arrangements to those who worked for him in the Cullen organisation, and only focussed on specific issues when it was necessary for him to take a decision or when he became concerned about a particular matter. In cases where emails had been sent to him, he several times stated that he did not recollect having read or having received them. He did not appear to have reviewed any of the key documents before giving evidence - including those written by himself or sent to him. This had the effect of rendering his evidence less helpful than it might otherwise have been. He was clearly embittered by what he saw as misconduct on Julian's part.

  13. Leslie Watson Archer: Mr Leslie Archer (``Mr Archer'') joined Cullen in 2000 and has held a number of financial management positions in the organisation, including that of investment director between 2007 and 2009. He left Cullen in the latter year but retains a consultancy role with the company. He provided a witness statement and gave oral evidence, including in cross-examination, over a VCF link from an office in New Zealand. He stated that Eric's views, as the owner of Cullen, were very important, and that if he wanted something done then, after discussion, it would be done. He did not appear to have been at all close to the details of the operation of KIL or the JV, and he frankly acknowledged that he was happy to remove himself still further from the detail once Ms Andrea Scown (``Ms Scown'') came onto the team at Cullen, with the specific responsibility of monitoring the JV on Cullen's behalf. As a result, his familiarity with the details of the arrangements for the JV and the documents was limited. His understanding was that KIL employed Julian and Quentin and earned management fees, and that any equity interests were held in special purpose vehicles (``SPVs''), with the ultimate beneficiaries being Julian's and Eric's off-shore trusts. His evidence on two important issues of fact (what was said at a meeting with Julian in New Zealand in December 2008, and during a telephone conversation with Julian on 19 or 20 January 2009) was vague in the extreme.

  14. Although I consider that Mr Archer was in general doing his best to assist the court, on several occasions in cross-examination he was slow to accept manifestly correct propositions based on the documents. One particularly striking example was his reluctance to accept that in an email sent to him by Julian on 13 January 2009 Julian was asking a straightforward question. I will need to return to Mr Archer's evidence about this and other related emails. Overall I did not derive much assistance from his evidence.

  15. William Gerald Gibson: Mr William Gibson (``Mr Gibson'') is a chartered accountant and the senior financial executive of Cullen. He has been with the group in one financial and/or management role or another since 1997. He is a participant in his personal capacity in various investments along with Eric and Cullen. From 2005 to 2010 he was special projects manager for Cullen, in which position he looked after various ``non-corporate'' interests of Eric/Cullen, including an estate in New Zealand, restaurants and sports interests. From 2006 he acted as the CFO of KIL, in which role he worked alongside the Browns in KIL's open-plan London office throughout all or most of the period relevant to the proceedings. He frankly accepted in cross-examination that in this regard he was ``the eyes and ears'' of Eric. However, notwithstanding the absence of privacy and the ability to overhear office conversations, he does not refer to anything which he heard or saw in the office which caused him concern, until the events of March 2012 to which I will refer in due course.

  16. One issue with which he dealt at length in his written and oral evidence was the timing of Julian's commitment to Mr Kahmann to make a personal equity investment in the German Opportunity, and whether, as Julian contends, it was not made until April 2009 or, as the Claimants argue, it was made earlier.

  17. Mr Gibson also gave evidence of his discussions with Julian and his investigations after the disclosure of the latter's personal investment in the German Opportunity, and of his analysis of the income and expenditure of KIL in connection with that venture. Mr Gibson was responsible for calculating that a sum of €300,000 (referred to in the particulars of claim) is the net amount due to KIL in respect of expenses and time incurred by Julian and Quentin on the German Opportunity, after allowing for what Mr Gibson considered to be a fair allocation in respect of work and expenses properly incurred on behalf of KIL. He was cross-examined extensively on his methodology in arriving at this sum, and generally. Mr Gibson was in my view an honest witness who did his best to assist the court.

  18. Bruce Allan Armitage: Mr Bruce Armitage (``Mr Armitage'') is a commercial lawyer by training but no longer practices as such. After a variety of management roles in the commercial sector he became a consultant in connection with acquisitions, dispositions and IPO's. Since 2002 he...

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