England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR D. DONALDSON QC SITTING AS DEPUTY JUDGE
IN THE CHANCERY DIVISION
[2014] EWHC 725 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		4th February 2015

Lord Justice Tomlinson:

1. By an Order of 21 March 2014 Mr David Donaldson QC, sitting as a Deputy Judge of the Chancery Division, to use his own language at paragraph 20 of his judgment giving his reasons therefor, ordered "implementation of an arrangement lacking (as pleaded, and perhaps in fact) agreement of an important element." In consequence he attributed to the Appellant Mr Thevarajah and to the First, Second and Fourth Respondents, respectively Mr Riordan and the two Messrs Burke an agreement which, demonstrably, they had not made. The question which arises on this appeal is whether he was right to do so. There is something very wrong with our legal system if the answer to that question is yes.
2. This is by any standards extraordinary litigation. That the decision of this court which we are now asked to make could be rendered wholly academic by an already outstanding appeal to the Supreme Court is one of its less extraordinary features. I do not propose to set out the entire sorry history.
3. Stripped to its bare essentials, the litigation relates to the intended acquisition by Mr Thevarajah of an interest in three public houses in North London. More accurately, Mr Thevarajah was to purchase all of the shares in the Third Respondent, which company owns "The Jewel", and to purchase 50% of the shares in the companies owning "The Jester" and "The Devonshire." The First, Second and Fourth Respondents were the owners of all the relevant shares. The consideration on Mr Thevarajah's case was £2.5 million plus the transfer to Mr Riordan and the two Messrs Burke of the leasehold interest in a pizzeria, to which a value was on his case ascribed of £250,000. The breakdown of this sum was that the price of the shares in Prestige Property Developer UK Limited, "Prestige", the Third Respondent, was £1.25 million plus the pizzeria, valued at £250,000; £750,000 for the Jester and £500,000 for the Devonshire.
4. By the time the matter came before the Deputy Judge Mr Thevarajah had, at the request of Mr Riordan and the two Messrs Burke, made a number of payments to them totalling £1,572,000. In return for these payments Mr Riordan and the two Messrs Burke transferred 50% of the shares in Prestige to Mr Thevarajah and allowed him into possession of The Jewel. Thereupon Mr Thevarajah spent large sums of money from his own resources in renovation of The Jewel.
5. The relationship between Mr Thevarajah and the others thereafter broke down, with each accusing the other of repudiatory breach of contract, although perhaps unsurprisingly given the position reached neither side accepted the same as terminating the contract between them. Each sought specific performance from the other. However by the time the matter was before the Deputy Judge Mr Thevarajah had abandoned that part of the claim which would have given him a 50% interest in the corporate vehicles owning The Jester and The Devonshire, recognising that specific performance would not be awarded in respect of an agreement which would require the co-operation of the parties to give it efficacy. Mr Thevarajah claimed damages in lieu based on the value of the properties. Mr Thevarajah lost that claim before the Deputy Judge and he does not appeal that outcome. The problem arises with the manner in which the Deputy Judge dealt with the remainder of the agreement.
6. The Deputy Judge records at paragraph 12 of his judgment that the First, Second and Fourth Respondents accepted before him that an order for transfer to Mr Thevarajah of the remaining 50% of the shares in Prestige was appropriate. The Deputy Judge accepted that Mr Thevarajah had in consequence made an overpayment of £72,000, and he directed repayment of that sum by the First, Second and Fourth Respondents to Mr Thevarajah and also the transfer to him of the shares in Prestige. The Deputy Judge thereby resolved in Mr Thevarajah's favour the contention of the First, Second and Fourth Respondents that the purchase price for the The Jewel alone was £2.5 million.
7. There were however two further complications. Prestige also owned another public house called "The Castle." It was agreed from the outset, and never thereafter disputed, that The Castle fell outside the terms of the agreement. It was not part of the deal. It was not intended that Mr Thevarajah should buy The Castle, or an interest therein, and thus was recognised that upon completion of his purchase of Prestige The Castle would be transferred out of Prestige to the First, Second and Fourth Respondents or to their nominated transferee. This however required the agreement of the Bank of Cyprus, to whom Prestige had outstanding indebtedness of about £1 million incurred in the purchase of The Castle secured by a charge over both The Castle and The Jewel. The Jewel in turn had been purchased with the assistance of a loan from the Bank of Cyprus. That indebtedness of about £800,000 was likewise secured by a charge over both The Jewel and The Castle.
8. Until the hearing before the Deputy Judge, the following was common ground between the parties:-

i) Mr Thevarajah would purchase the entire issued shared capital in Prestige at which time, ie on transfer of the shares, its assets would consist of The Jewel alone- Defence and Counterclaim paragraph 11 (a);

ii) Mr Thevarajah would assume responsibility for the indebtedness referable to The Jewel. The price payable in cash for the shares in Prestige would be abated by £800,000, or whatever the level of the outstanding indebtedness to the Bank of Cyprus referable to The Jewel at the time of transfer proved to be. Interest was of course accruing on the indebtedness- Defence and Counterclaim paragraphs 11 (c), 21 and 50;

iii) The First and Second Respondents would assume liability for the borrowing associated with The Castle when that property was transferred to them- see for example witness statement dated 5 July 2013 of the First, Second and Fourth Respondent's solicitor, Mr Jonathan Fletcher at paragraph 7 to the following effect:-

"In the event that the First Claimant points to the borrowing associated with The Jewel Public House, in the region of £800,000, as being part of his claim for damages there is ample evidence within the Claimant's own papers to confirm that it had always been intended that the Claimant would take on this borrowing as part of the restructuring of the Third Defendant, with the First and Second Defendants taking the remainder of the borrowing along with the Holloway Castle public house."

9. On this basis, Mr Thevarajah had in fact overpaid £872,000 being the acknowledged £72,000 surplus over £1.5 million and an amount representing the indebtedness referable to the purchase of The Jewel and secured thereon.
10. By the time of the hearing before the Deputy Judge it was clear that the Bank of Cyprus would not consent to the transfer of The Castle.
11. It was therefore proposed by Mr Thevarajah that specific performance of the agreement should be achieved by directing the First, Second and Fourth Respondents to pay to Mr Thevarajah, shortly after the transfer to him of the shares in Prestige, approximately £2,057,837, being £72,000 plus £800,000 plus £1 million together with the interest appropriately accrued on each sum. This sum was claimed as damages for breach of the purchase agreement but it might equally, and perhaps more appropriately, have been claimed as the amount due on the taking of an account between the parties as part of the decree of specific performance.
12. The Deputy Judge regarded himself as precluded from taking this course by reason of inadequacies in Mr Thevarajah's Particulars of Claim. Instead, the Deputy Judge:-

i) Ordered the First, Second and Fourth Respondents to transfer to Mr Thevarajah the remaining 50% of the shares in Prestige;

ii) Ordered Mr Thevarajah simultaneously to procure the transfer of The Castle to the First, Second and Fourth Respondents or to such other person or entity as they might direct;

iii) Ordered the First, Second and Fourth Respondents to pay £72,000 to Mr Thevarajah, and

iv) Declared that Mr Thevarajah was not entitled to any further damages or payment.

13. The upshot was that there was attributed to Mr Thevarajah an agreement to purchase for £1.5 million the shares in a company which at the time of the agreement had an indebtedness of £1.8 million and assets worth at most £1.5 million. I did not find convincing the spirited attempt by Mr Simon Davenport QC to defend the commercial logic of such a bargain by speculation as to possible fiscal advantages to Mr Thevarajah. It can rarely be advantageous to pay £1.5 million for a company which has a net liability of £300,000.
14. The Deputy Judge in my view fell into error for two reasons. In the first he was not greatly assisted by the parties and it can be said that to some considerable extent Mr Thevarajah contributed to his own misfortune. Thus there was in the first instance, at it seems to me, confusion on all sides as to what was the nature of the hearing which the Deputy Judge was conducting. The Deputy Judge seems to have thought that he was conducting a procedure akin to that adopted in default cases. This led him to look at the Particulars of Claim in complete isolation from the other material before him including the Respondents' Defence and the solicitors' correspondence. Secondly, and perhaps because of that confusion, the Deputy Judge misinterpreted the Particulars of Claim. Properly understood, the Particulars of Claim made clear that The Castle was to be extricated from Prestige, together with the borrowing secured on it, and that Mr Thevarajah was to be given credit against the purchase price for the indebtedness outstanding to the Bank of Cyprus which would remain with Prestige on completion of the share transfer.
15. The origins of the first error lie in the history. In considering the nature of the hearing conducted by the Deputy Judge it is important to bear in mind the nature of the relief claimed in the Particulars of Claim. The relief claimed by the First Claimant Mr Thevarajah was:-

(1) Specific performance of the Agreement as aforesaid; and

(2) An order requiring the First, Second and Fourth Defendants to transfer or cause to be transferred such shares as may be necessary to ensure that the First Claimant owns the entirety of the issued share capital in the Third Defendant; and

(3) £332,000 or alternatively £72,000 as aforesaid; and

(4) Further damages to be assessed; or in the alternative to (1) to (4)

(5) £1,572,000 and

(6) Further damages to be assessed; or in the alternative to (5) and (6)

(7) A declaration that First and/or Second and/or Fourth Defendants hold the sum of £1,572,000 on trust for the First Claimant together with an order for payment; and in each case

(8) Interest as aforesaid; and

(9) Such other accounts and enquiries as the court thinks fit

(10) Declarations as aforesaid in respect of the directorships, share capital and shareholding in the Third Defendant;

(11) Costs;

(12) Further or other relief.

This relief, or at any rate most of it, is not obtainable by simply filing a request for judgment. It is relief which requires the court to be satisfied, exercising its judicial function, that it is appropriate to grant it. For what it is worth, the relief sought by the four Defendants in their Defence and Counterclaim was similarly complex:-

(1) Specific performance of the Agreement as aforesaid; and

(2) An order requiring the First Claimant to transfer or cause to be transferred the Holloway Castle out of the Third Defendant to the order of the First and/or Second Defendants; and

(3) £128,000; and

(4) Further damages to be assessed; and

(5) Interest as aforesaid; and

(6) Such other accounts and enquiries as the Court thinks fit; and

(7) Costs; and

(8) Further or other relief.

16. On 21 June 2013 Henderson J made an order in these terms:-

"And whereas a Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 9th May 2013 requiring those Defendants to provide certain information among other things ("the First Order")

And whereas a further Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 17^th May 2013 requiring those defendants to provide certain information among other things ("the Second Order")

It is ordered that:

Without prejudice to the effect of, and the obligations imposed by, the First and Second Orders generally, unless each of the First, Second and Fourth Respondents do provide the information particularised immediately below by 4pm on 1^st July 2013 then the First, Second and Fourth Respondents shall be debarred from defending the Applicants' claim and any Defence that they might have filed shall be struck out.

1.1. Details of any charges or other similar such encumbrances on any real property (as defined in paragraph 8(2)(a) of the Second Order), including particulars of the specific interest that is so charged, together with the provision of bank or similar such statements covering the period 1^st October 2010 until the date of this order in respect of any and all accounts of any borrowing secured against such real property;

1.2. Details of all of the said Respondent's bank accounts, whether or not they are in their own name and whether they are solely or jointly owned and whether the said Respondents and each of them are interested in them legally, beneficially or otherwise, together with the provision of bank or similar such statements covering the period 1^st October 2010 until the date of this order in respect of any and all such accounts;

1.3. Sub-paragraphs 1.1 and 1.2 above apply also to those assets, liabilities, and bank or other accounts and statements in respect of

1.3.1. Prestige Properties Limited;

1.3.2. Prestige Property Developer UK Limited;

1.3.3. Prestige Property Developer UK Limited;

1.3.4. In & Out Developments Limited;

1.4. Full particulars as to how the said Respondents are funding the present litigation, including but not limited to the identification of the funder(s), the amount(s) that the said Respondents have spent and are proposing to spend, and the details of the bank account(s) from which funds are being transferred to the said Respondents' lawyers."

17. The First, Second and Fourth Respondents did not comply with that Order and in consequence on 9 August 2013 Hildyard J ordered as follows:-

"And whereas a Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 9^th May 2013 requiring those Defendants to provide certain information among other things ("the First Order")

And whereas a further Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 17^th May 2013 requiring those Defendants to provide certain information among other things ("the Second Order)

And whereas an order was made against the First, Second and Fourth Defendants by Mr Justice Henderson dated 21^st June 2013 debarring them from defending the proceedings unless they provide certain information as described in that order ("the Unless Order")

And whereas this matter is currently set down for trial in a window between 1^st October 2013 and 31^st October 2013

And whereas the court made an order by consent dated 9^th August 2013 disposing of the Second Claimant's claim

It is declared that

1. the First, Second and Fourth Defendants have failed to comply with the Unless Order and are debarred from defending the First Claimant's claim;

And it is ordered that:

2. The Defence and Counterclaim filed on behalf of the First, Second and Fourth Defendants be struck out.

3. The determination of the remaining heads of relief claimed by the First Claimant as particularised in his Particulars of Claim be adjourned for a disposal hearing to take place in the current trial window, or at such earlier time as the court may list it upon the application of the First Claimant.

4. The First, Second and Fourth Defendants do pay the First Claimant's costs of and occasioned by the Application on the indemnity basis summarily assessed in the sum of £22,000.00."

18. The expression "disposal hearing" is I think more commonly used in the County Court than in the High Court. It is however defined in Practice Direction 26. CPR Rule 26 is concerned with Case Management. Paragraph 12.1 of PD26, under the rubric "Determining the Amount to be Paid under a Judgment or Order", provides:

"12.1 Scope

(1) In the following paragraphs –

(a) a 'relevant order' means a judgment or order of the court which requires the amount of money to be paid by one party to another to be decided by the court; and

(b) a 'disposal hearing' means a hearing in accordance with paragraph 12.4.

(2) A relevant order may have been obtained:

(a) by a judgment in default under Part 12;

(b) by a judgment on an admission under Part 14;

(c) on the striking out of a statement of case under Part 3;

(d) on a summary judgment application under Part 24;

(e) on the determination of a preliminary issue or on a trial as to liability; or

(f) at trial.

(3) A relevant order includes any order for the amount of a debt, damages or interest to be decided by the court (including an order for the taking of an account or the making of an inquiry as to any sum due, and any similar order), but does not include an order for the assessment of costs."

Pausing there, there was in this case no "relevant order". No order had yet been made which required an amount of money to be paid. As the order of Hildyard J recited, the heads of relief claimed by the First Claimant, Mr Thevarajah, required to be determined, and they went beyond mere payment of money.

The nature of a disposal hearing is further spelled out in PD26 paragraph 12.4:-

"(1) A disposal hearing is a hearing –

(a) which will not normally last longer than 30 minutes, and

(b) at which the court will not normally hear oral evidence.

(2) At a disposal hearing the court may –

(a) decide the amount payable under or in consequence of the relevant order and give judgment for that amount; or

(b) give directions as to the future conduct of the proceedings.

(3) If the claim has been allocated to the small claims track, or the court decides at the disposal hearing to allocate it to that track, the court may treat the disposal hearing as a final hearing in accordance with Part 27.

(4) Rule 32.6 applies to evidence at a disposal hearing unless the court directs otherwise.

(5) Except where the claim has been allocated to the small claims track, the court will not exercise its power under sub-paragraph (2)(a) unless any written evidence on which the claimant relies has been served on the defendant at least 3 days before the disposal hearing."

The cross reference to Rule 32.6 emphasises, if it is not already sufficiently clear, that a disposal hearing is not a trial. What was required in order to determine whether Mr Thevarajah was entitled to the relief claimed was a trial. Although we have no transcript of the hearing before Hildyard J, it appears that that was also his view. According to a note cited by the Respondents' counsel in their skeleton argument placed before the Deputy Judge, Hildyard J observed on that occasion that:-

"You need to prove your right with regards to anything that goes to the substance of the claim, you cannot seek judgment in default. That would not work."

19. On 23 October 2013 Mr Andrew Sutcliffe QC, sitting as a Deputy Judge of the Chancery Division, granted to the First, Second and Fourth Respondents relief from the sanction imposed by the Unless Order of Henderson J and set aside the Debarring Order made by Hildyard J. He directed that there be a speedy trial to take place at the end of January 2014.
20. On 13 December 2013 the Court of Appeal, Richards, Aikens and Davis LJJ, set aside the Order made by Mr Sutcliffe. The orders of Henderson and Hildyard JJ were thereby reinstated. The court did not immediately give its reasons for its decision.
21. On 13 January 2014, three days before the Court of Appeal provided its reasons, Mr Thevarajah issued an Application Notice. In Box 3, under the rubric "What order are you asking the court to make and why?" there appeared the following:-

"The Applicant seeks an order in the form attached for a declaration and entering judgment in the sum of £2,129,837.74 plus interest as against the D1, D2 and D4 (pursuant to CPR r.3.5(2)), specific performance of an agreement for the purchase of shares in D3 (pursuant to CPR Part 23), permission to rely upon expert evidence, assessed damages in the sum of £542,500 (pursuant to CPR Part 23), the continuation of two interim injunctions, and costs together with an order for a payment on account, together with any further directions as may be necessary.

The Applicant is entitled an order in these terms because D1, D2 and D4 have had their defence struck out and have been debarred from defending the claims against them."

Rule 3.5 (2) is of no application to this case, as we shall shortly see. Save that Part 23 is concerned with the making of applications, it contains nothing which would justify the court directing specific performance of an agreement without enquiring into the question whether the claimant thereto is entitled to such relief. Mr Thevarajah was not "entitled" to any of this relief simply because the Defendants had had their defences struck out and been debarred from defending the claims brought against them.

22. The draft Order attached to the Application Notice contained the following relief:-

"It is declared that

(1) the First, Second and Fourth Defendants were liable to pay to the Claimant such sum as is necessary to allow the Claimant to discharge all of the Third Defendant's debts accrued as at the rate of this order (whether presently known or unknown), together with any sum falling due in the future (whether by way of a tax liability or otherwise) in respect of any sale or transfer of the Castle to the First, Second and Fourth Defendants, or to a person or entity nominated by them;

And it is ordered that:

1. The First, Second and Fourth Defendants shall by 4pm on 22^nd January 2014

1.1. state and certify the number of shares in the Third Defendant that they have a legal and/or beneficial interest in; and

1.2. transfer to the Claimant all legal and beneficial interest that they have in any issued shares in the Third Defendant.

2. The register of members of the Third Defendant be rectified as necessary and as soon as practicable to give effect to the declarations in paragraphs (1) above, and pursuant to section 125(2) of the Companies Act 2006;

3. The Third Defendant do give notice in this order to the registrar of companies within 14 days of the date of this order, and pursuant to section 125(4)

4. The First, Second and Fourth defendants do pay the First Claimant the sum of £72,000 by 31^st January 2014, together with interest in the sum of [£ ] and therefore amounting to a total of [£ ];

5. Save as otherwise provided by paragraph 6 below the First, Second and Fourth Defendants to pay the First Claimant the further sum of £2,057,837.741 by 4pm 31^st January 2014;

1. For the purposes of the draft version of the Order: £1,993,823.42 (being the sum due and paid to the Bank on or around 6^th December 2013 at the time of the refinancing) + £6,904.11 (being the interest due on the refinancing loan of £1,000,000 from 6^th December 2013 to 17^th January 2014) + £13,068.17 (being the interest due on the refinancing loan of £946,404.92 from 6^th December 2013 to 17^th January 2014) + £46,800 (being the rental income received from Carlton Leisure Ltd) -£2,757.96 (being the balance in the Third Defendant's bank account.)

6. In the event that the Defendants are able to procure an offer from the Bank of Cyprus ("the Bank") to restructure the Third Defendant's borrowing with the Bank by a proposed transfer of the property known as The Holloway Castle Public House, 392 Camden Road, London, N7 0SJ ("the Castle"), together with a transfer of a proportion of the said borrowing, to a person or entity nominated by the First, Second and Fourth Defendants, such that the Bank is prepared to reduce the sum due from the Third Defendant to it, the sum referred to in paragraph 5 above shall be reduced accordingly, provided that the Bank apply and give effect to such reduction by 4pm on 31^st January 2014;

7. Upon payment of the entirety of the sums referred to in paragraphs 4 and 5 (and as varied by paragraph 6 if applicable), and provided such payments are made in their entirety before 4pm on 31^st January 201, the Third Defendant shall transfer (and the Claimant shall caused the Third Defendant to transfer) the Castle to such person or entity as the First, Second and Fourth Defendants shall nominate as soon as practicable thereafter.

8. In the event that the entirety of the sums referred to in paragraphs 4 and 5 have not been paid by 4pm on 31^st January 2014 then the Claimant shall be at liberty to sell the Castle for fair market price and to apply the proceeds of sale towards the sums dues from the First, Second and Fourth Defendants."

23. Although we have not been shown it, it appears that on 14 January 2014 the First, Second and Fourth Defendants issued an application to strike out the Claimant's claim, alternatively for an order debarring the Claimant from relying upon "documentary and further witness evidence."
24. On 16 January 2014 the Court of Appeal issued its reasons for the decision of 13 December 2013. At paragraph 38 of the judgment of the court Richards LJ said:-

"Fourthly, we are troubled by the deputy judge's observation that even if the respondents remained debarred from defending the claim they would be "entitled at trial to require the Claimant to prove his claim, to cross-examine and make submissions" (see para 16 above). The cases to which he referred in that connection, namely Culla Park Ltd v Richards [2007] EWHC 1687 and JSC BTA Bank v Ablyazov (No.8) [2013] 1 WLR 1331, do not appear to us necessarily to support so sweeping a proposition. This issue, however, will be a matter for decision by the judge who hears the trial; and, having put down a marker in relation to it, we think it better to say no more on the subject at this stage."

From that it appears to have seemed axiomatic to the Court of Appeal, as it had to Mr Sutcliffe, that notwithstanding the Order made by Hildyard J the matter had to proceed to trial.

25. On 23 January 2014 there took place a hearing before Sales J, as he then was. The preliminary exchange on pages 1 and 2 of the transcript is instructive:

"MR BAILEY: You will see there is a trial, or at least a final disposal hearing of some description occurring next week?

MR JUSTICE SALES: Yes, I was just slightly unclear what I was being asked to do today? Am I being asked to make a final order which obviates the need for that final hearing or are you looking forward to that final hearing being the occasion ---

MR BAILEY: Given where we find ourselves today and given the number of ancillary matters that your Lordship is going to be asked to deal with we are not anticipating that we are going to get to dealing with the matter substantively today. So we have in mind that that will be dealt with at a hearing of some description next week.

The primary question that I say your Lordship needs to consider today is, to put it in colloquial language, what are the rules of the game for the hearing next week. Your Lordship will appreciate that the defendants have been debarred from defending, and that they have also had their defence struck out.

MR JUSTICE SALES: Yes.

MR BAILEY: And there was some controversy as to what they can and cannot do. We say the position is remarkably straightforward, which is that they cannot do anything. They are not in a position to contest anything that we say; they are not entitled to participate. However, that does not mean, of course, I can have any order I want, I am going to have to demonstrate to the court on my pleadings and on my evidence that I am entitled to the relief that I seek. That is the primary issue for your Lordship."

26. Mr Bailey's first instincts were in my view correct, although later in the hearing, and confusingly, he equated the position with that which obtains when judgment in default is sought.
27. Sales J did not accept that the limitations on the ability of the First, Second and Fourth Respondents to participate in the forthcoming hearing were as extensive as Mr Bailey suggested. His order was, in material part:-

"… WHEREAS the First, Second and Fourth Defendants' application to strike out the Claimant's claim, alternatively for an order debarring the Claimant from relying upon documentary and further witness evidence, was abandoned during the course of submissions.

AND WHEREAS the First, Second and Fourth Defendants have had their defence struck out and have been debarred from defending pursuant to the order of Mr Justice Henderson dated 21^st June 2013 AND WHEREAS the parties have all sought a determination as to the effect of that order at trial

AND WHEREAS an agreed note of judgment is appended to this Order

IT IS ORDERED that:

The First, Second and Fourth Defendants' application to vacate the final hearing listed in a 5-day window commencing 27^th January 2014 ("the Final Hearing") be dismissed.

Each party shall be entitled to call expert evidence in respect of the valuation of the public houses referred to in the Particulars of Claim as the Devonshire and the Jester. The said Defendants shall file and serve a revised version of their expert report confined to those matters by 4pm on 27^th January 2014.

At the Final Hearing the First, Second and Fourth Defendants:

shall not be permitted to participate in any matters of liability pleaded in the Claimant's Particulars of Claim save for assisting the court in understanding the Claimant's case if necessary;

shall have no right to take any steps to challenge any parts of the Claimant's claim as pleaded in his Particulars of Claim or evidence adduced in support thereof;

shall be permitted to participate fully in matters of quantum where such quantum is pleaded as damages to be assessed being the issue of the quantum of debts and liabilities of the Third Defendant and the market value of each of the Jester and the Devonshire.

The First, Second and Fourth Defendants shall file and serve a list of points of dispute pertaining to damages to be assessed where they take issue with the Claimant's case (within the scope permitted by this order) by 9am on Monday 27^th January 2014.

Each party shall file and serve skeleton arguments by 12 noon on Tuesday 28^th January 2014."

28. Two passages from the judgment of Sales J given on this occasion are of importance. First, in relation to the substantive claim, he said this, as recorded in the agreed note of judgment appended to the Order:-

"The position that attained at the time that Henderson J made his order was this. The Particulars of Claim set out in considerable detail the nature of the agreements made between the Claimant and the Defendants, the alleged breach of the agreements and various torts said to be committed by them. In relation to two matters relevant for present purposes, the Claim as set out in the prayer at the end of the Particulars of Claim was for an order for damages to be assessed.

The first part of the case for damages to be assessed related to a public house called The Jewel. The agreement had been that the claimant would acquire full ownership and control via 100% ownership of a corporate vehicle, free from debt and encumbrances. In the event, it is claimed that The Jewel and related corporate vehicle have been subject to encumbrances and debt obligations which were substantial. The Claimant claims damages in an amount required to discharge the said debt obligations.

The other part of the case for damages to be assessed related to the agreement that the Claimant should acquire 50% ownership of each of the public houses called The Devonshire and The Jester. In relation to that part of the case, the Claimant acknowledges and accepts that specific performance would not be an appropriate form of relief, hence he advances a claim for damages for what was in substance a repudiation. The damages claimed relate to the extent to which the market value exceeds the price that he agreed to pay. As is clear, expert evidence is required of the market value in order for damages to be assessed on that part of the claim."

From that passage it is clear that Sales J had no difficulty in discerning from the Particulars of Claim that the agreement asserted was that Mr Thevarajah would acquire control of Prestige free from debt and encumbrances, and that insofar as release from the debt and encumbrances could not be achieved (sc by the parties themselves without the agreement of the Bank of Cyprus) Mr Thevarajah sought damages in an amount required to discharge the debt obligations. Only The Jewel was mentioned in this regard. That reflected the fact that from the outset the parties had proceeded upon the basis that The Castle formed no part of the deal and that both it and the debt associated with it would be transferred out of Prestige rather than assumed by Mr Thevarajah.

29. Secondly, in a later passage, Sales J said:-

"Mr Bailey for the Claimant submitted that the Defendants have no right of participation at all in relation to liability. In my view that goes too far. If, for example, in relation to a judgment entered in default of defence (a position analogous to that achieved by the sanction in Henderson J's order) it later emerges that the trial judge had misunderstood the claim and granted excessive relief, that would provide grounds for an appeal, and the defendant would be entitled to bring and maintain such an appeal. That being so, the judge at a hearing at first instance faced with a claim for judgment to be entered in default would likewise potentially be assisted by submissions from counsel for the defendant directed solely to understanding the extent of a claim set out in the particulars of claim. To that limited extent, counsel for the Defendants in this case will have a right of participation in the further hearing in so far as it relates to the claim already set out in the pleading in the Particulars of Claim. I emphasise how limited that role is. It is confined to assisting the court in understanding the case pleaded, which the Defendants have been debarred from defending."

30. There has been no appeal against the Order made by Sales J and so any observations of mine in this connection are unnecessary to our decision and are of necessity obiter. Nonetheless, I respectfully doubt whether in this case the position achieved by the sanction in Henderson J's order was analogous to a judgment in default of defence. Furthermore, whilst I appreciate that this was an extempore judgment, there is a certain tension between the drawing of that analogy and the judge's use in the same sentence of the expression "the trial judge".
31. The First, Second and Fourth Defendants filed their Points of Dispute on 27 January 2014. In it they contested liability for unsecured debts of Prestige as sought to be imposed by Mr Thevarajah. By contrast, so far as concerned the secured lending, the Claimant was put to proof of the amounts outstanding, but there was no suggestion that he was not entitled to recover such amounts.
32. Ultimately the matter came before Mr Donaldson on 30 and 31 January and 3 February 2014. Mr Bailey's skeleton argument prepared for that hearing described it, at paragraph 1 as "the final hearing/trial of a Part 7 Claim (although it began its life as a Part 8 Claim)." The Respondents' skeleton, to which I have already referred at paragraph 18 above, was to similar effect. Thus at paragraph 1, it was said:

"This skeleton argument … deals or attempts to deal with what remains of the trial of this action."

33. It is therefore to my mind clear that Mr Donaldson was conducting a trial. Whilst of course the claims in respect of which the Claimant sought a determination had to be found in his Particulars of Claim, the court was not engaged upon the mechanistic, administrative, non-judicial, function described in CPR 12.11 to which the judge referred at paragraph 4 of his judgment:-

"Where the claimant makes an application for a default judgment, judgment shall be such judgment as it appears to the court that the claimant is entitled to on his statement of case."

The Deputy Judge did not have to ignore how the pleaded claims had been clearly understood in the Defence or in the correspondence. Curiously, at paragraph 16 of his judgment the Deputy Judge recorded that the Defence and Counterclaim had ceased to exist and had been omitted from the bundles before him, notwithstanding that earlier in the same paragraph he had referred to two passages contained in that pleading on which Mr Bailey had relied. Mr Davenport reminded us that the "Glossary" at Section E of Civil Procedure says that the meaning of the expression "Strike Out" is "the court ordering written material to be deleted so that it may no longer be relied upon". The status of the glossary is explained in CPR 2.2(1), which states that it "is a guide to the meaning of certain legal expressions used in the Rules, is not to be taken as giving those expressions any meaning in the Rules which they do not have in the law generally." At paragraph 16 (a) of his judgment the Deputy Judge also referred to the Defence and Counterclaim as having been "erased" and said that "any statement dependent for its vitality on the continued existence of the now erased Defence and Counterclaim cannot be invoked to supply, cure or support any claim not, or inadequately, advanced in the Particulars of Claim." I do not entirely understand the ambit of this approach but I do not agree with the notion that the Defence had for all purposes ceased to exist. What had happened is that the Respondents had been debarred from defending. To that extent the Defence could not be relied upon by the Respondents, but it would be absurd if the document could not be relied upon by the Claimant as indicating the ambit of the dispute. Were that not the case, matters which were never in issue because of admissions in the pleadings would suddenly become contentious, with the extraordinary and perverse effect that the burden on the claimant at trial would be increased. The obverse would equally be true- a defendant may by virtue of being debarred from defending avoid the consequences of his admissions, thereby casting upon the claimant a burden which may, in reliance upon the admission, have become more difficult or even impossible to discharge. I agree with Mr Smith's happy observation that "a defence will have left a lasting legacy on the statements of case as a whole. By virtue of what is said in a defence, the content of any reply, or the decision not to rely upon one, will have been affected. Further, if the defence indicates to a claimant that the parties are in agreement as to what they disagree about, it will impact upon any consideration of whether to amend the particulars of claim to clarify anything that might be said to have been unclear." It might also for example have been necessary to look at the Claimant's Reply and Defence to Counterclaim which would most likely be difficult to follow without resort to the pleading to which it was responsive.

34. It follows that I do not consider that the Deputy Judge was precluded from having regard to the Defence and Counterclaim if that document helped him to understand the ambit of the dispute between the parties. However, I consider that the Particulars of Claim were in any event sufficiently clear.
35. Mr Davenport took us to a number of other provisions in the CPR and invited us to conclude that the Claimant had "chosen the default judgment route." However the default judgment route was unavailable and there is, in my view, no room for a trial process which is analogous thereto. A trial involves a judicial determination. The default process does not require judicial input, save in the exception which proves the rule, civil proceedings against the Crown, see CPR 12.4 (4).
36. Mr Davenport began with CPR 3.5 which under the rubric "Judgment without trial after striking out" provides:-

"(1) This rule applies where –

(a) the court makes an order which includes a term that the statement of case of a party shall be struck out if the party does not comply with the order; and

(b) the party against whom the order was made does not comply with it.

(2) A party may obtain judgment with costs by filing a request for judgment if –

(a) the order referred to in paragraph (1)(a) relates to the whole of a statement of case; and

(b) where the party wishing to obtain judgment is the claimant, the claim is for –

(i) a specified amount of money;

(ii) an amount of money to be decided by the court;

(iii) delivery of goods where the claim form gives the defendant the alternative of paying their value; or

(iv) any combination of these remedies.

(3) Where judgment is obtained under this rule in a case to which paragraph (2)(b)(iii) applies, it will be judgment requiring the defendant to deliver goods, or (if the defendant does not do so) pay the value of the goods as decided by the court (less any payments made).

(4) The request must state that the right to enter judgment has arisen because the court's order has not been complied with.

(5) A party must make an application in accordance with Part 23 if they wish to obtain judgment under this rule in a case to which paragraph (2) does not apply."

As already noted, this case does not fall within rule 3.5 (2) as the relief claimed went far beyond that therein stated. It is true that rule 3.5 (5) mandates an application under Part 23 if a party wishes to "obtain" judgment under this rule in a case to which paragraph (2) does not apply. But a judgment "under this rule" is a judgment without trial. Rightly, it was here recognised albeit not perhaps consistently that the Claimant had to prove his case and his entitlement to the relief sought.

37. Mr Davenport took us through Part 12 and the Practice Direction thereto but neither have any relevance to the procedure which had to be followed in this case. In particular paragraph 4 of the Practice Direction relates to evidence of compliance with the procedural requirements for obtaining judgment in default. It is not indicative that on an application for default judgment evidence as to the substance of the dispute will be entertained.
38. Finally Mr Davenport drew our attention to Rule 16.4 which describes the required content of particulars of claim. The Particulars of Claim in this case fall woefully short of constituting "a concise statement of the facts on which the claimant relies"- 16.4 (1) (a), but in that they are far from untypical. The question is whether on a fair reading of the Particulars of Claim it was plain that the Claimant asserted that the agreement was that he should receive The Jewel unencumbered, and that The Castle and its associated indebtedness fell outside the scope of what was to be acquired by him.
39. The agreement was largely oral and it is plain that it varied over time as it began to embrace more properties and in order to accommodate ongoing developments. To that extent the pleader's task was rendered more difficult than often it is. The most immediately relevant paragraphs of the Particulars of Claim are:-

"The Agreement

11. In October 2011, and after a series of meetings between the First Claimant on the one hand and the First and Fourth Defendants (acting on behalf of all the Defendants) on the other, an agreement was reached ("the Agreement") by which the First Claimant was to acquire an interest in certain public houses as particularised below. The interest was to be indirect in that it was envisaged that the First Claimant would acquire shares in certain corporate entities which in turn owed the said public houses.

13.The terms of Agreement were recorded in a document entitled "Memorandum of Understanding" ("the MoU"). The MoU was drawn up by Mr Sharvanandan Arnold of BBK Partnership (Accountants) on or shortly before 17 October 2011 following a meeting he had had with the First and Fourth Defendants and circulated to the First Claimant and to at least the Fourth Defendant. The named parties to the MoU were the First and Second defendant "And their companies" on the one hand (defined therein as "the Sellers") and the First Claimant "And his Companies" on the other (defined therein as "the Buyer").

14. The terms of the Agreement included the following:

14.1. The First Claimant would purchase the entire issued share capital in the Third Defendant which at that time owned two public houses being the Jewel and the Castle;

14.2. The Castle would be extricated from the Third Defendant either by sale to a third party or otherwise transferred to one of the companies used as a vehicle by the First and/or Second Defendant , or to the First and/or Second Defendants themselves;

14.3. The purchase price for the said shares in the Third Defendant would be £1,250,000;

14.4. The First Claimant would purchase 50% of the issued share capital in a company to be formed for the purpose to be called "John and Tavi Ltd ("JTL"). At the same time the Sellers would cause the leasehold interest in a public house known as The Devonshire Castle, 67 Axminster Road, Hornsey, London N7 6BP ("the Devonshire") to be transferred from Prestige Properties Limited to JTL (the said lease being a term of 999 years commencing 1^st January 2008);

14.5. Further, the freehold interest in the Devonshire would be transferred to a new company to be formed for the purpose to be called "Company ABC Ltd" ("ABCL") with the First Claimant to have transferred to him 50% of the issued share capital. (As at October 2011 the said freehold interest was then owned by the First Defendant.)

14.6. The purchase price for the said shares in JTL would be £750,000;

14.7. By way of further consideration the First Claimant would transfer to the First, Second and Fourth Defendants a leasehold business interest known as Pizzeria Romana.

17. By email dated 2^nd December 2011 the Fourth Defendant provided the First Claimant with bank account details in respect of the Third Defendant requesting further payment in the sum of £280,000. The Fourth Defendant stated that this was a "…request by boc, to agree to what we proposed to them in splitting the jewel/castle". By this the Fourth Defendant was acknowledging that the Bank of Cyprus ("the Bank") had a charge on each of the Jewel and the Castle and that monies needed to be paid to reduce that borrowing if the Bank were to server the loan and separate their security into distinct loans and charges to allow the Castle to be transferred out of the Third Defendant as provided for in the Agreement.

18. By email dated 15^th December 2011 the Applicant by his then solicitor, Mr Raveenderan of K Ravi Solicitors, sought to confirm the security position in respect of the Jewel and the Castle with the Bank. By this stage it was envisaged that part of the consideration in respect of the Jewel would be paid by way of the First Claimant taking over responsibility for the borrowing secured on the Jewel, save that it would need to be determined what proportion of the total sum lent to the Third Defendant by the Bank and secured on the Jewel and the Castle jointly would be left secured on the Jewel alone.

22. Sometime around the beginning of February 2012, and in any event by 3^rd February 2012, the First, Second and Fourth Defendants, who were in need of further funding, offered the First Claimant the opportunity to acquire a 50% indirect interest in a property known as The Jester Public House, Cockfosters, London EN4 9HG ("the Jester"). The interest was to be indirect in that the First Claimant was to acquire 50% of the issued share capital in a corporate vehicle that would own the property ("the Jester Corporate Vehicle"). The purchase price of the said shares was £500,000.

23. Accordingly the Agreement was varied so as to include the acquisition in respect of the Jester as aforesaid. In the alternative the agreement in respect of the Jester amounted to a separate stand alone agreement. Thus the total sum due to be paid by the First Claimant was such amount less than £2,500,000 that reflected the size of the load secured on the Jewel (the £2,500,000 being made up of £1,250,000 in respect of the Jewel, £750,000 in respect of the Devonshire and £500,000 in respect of the Jester). Thus if the Jewel were to have had £1,000,000 secured on it, the total cash sum to be paid would have been £1,500,000. The exact sum secured on the Jewel would be a function of both the total balance of the loan and the manner in which it was severed, one part being secured on the Jewel and the other part being secured on the Castle.

26. The First Claimant was given the keys to the Jewel at the end of February 2012. This was on the basis of a provisional agreement from the Bank that the First Claimant would be given a loan from the Bank of Cyprus once the existing borrowings had been split between the Jewel and the Castle.

27. In February 2012 the First Claimant was offered a loan by the Bank of Cyprus. The balance of approximately £1.8 million then secured on the Jewel and the Castle would be split with £800,000 secured on the Jewel alone. The interest rate was to be 7% per annum and there was also to be an exit fee.

36. By email on 17^th July 2012 at 11.41 the First Defendant (on behalf of himself, the Second and Fourth Defendants) made an offer of a unilateral contract ("the Second Collateral Contract") the terms of which were that if the First Claimant were to pay a further £280,000 to YVA Solicitors to add to the £220,000 paid to them on 30^th May 2012 (such that they would then be holding £500,000), such total sum to be held to the First Claimant's account, then the First, Second and Fourth would procure that the First Claimant would become the sole director of the Third Defendant. Upon Mr Arnold providing confirmation of the same, the said £500,000 would be released from YVA Solicitors and paid to the Bank, save that the proposed deed of trust also required signature.

37. It is notable that the First Defendant recorded in the same email that the said deed of trust "becomes void when the monies are [paid anyway" (sic.), reflecting that the First Defendant considered that the First Claimant would have parted with sufficient cash, or approximately sufficient cash, to complete the Agreement. The First Claimant still needed to take over such part of the lending that would ultimately remain secured on the Jewel after the severing of the loan by the Bank.

53. With regard to the breakdown of all trust and confidence as between the parties, the First Claimant concedes that specific performance of the Agreement with regards to those aspects concerning the Devonshire and the Jester is impractical and that joint and equal ownership of one or more corporate vehicles with the First, Second and Fourth Defendants would likely result in further litigation in the form of minority shareholder relief or otherwise. Accordingly the First Claimant confines its claim to specific performance to those aspects of the Agreement pertaining to the Jewel.

54. Further to paragraph 52, the First Claimant claims the sum of £322,000 representing the difference between the £1,572,000 paid and the £1,250,000 being the cash purchase price in respect of the Jewel (upon the transfer of Pizzeria Romano to the First, Second and Fourth Defendants), or alternatively the sum of £72,000 (without the transfer of Pizzeria Romano, the parties ascribing a value of £250,000 to the pizzeria and the associated leasehold.)

56. In the alternative to paragraphs 52 to 55 and in the event the court does not order specific performance of the Agreement such that the First Claimant is required to return the shares in the Third Defendant, the First Claimant claims damages in respect of the Agreement for breach of contract as follows:

56.1. £1,572,000 being the total sum in cash paid by the First Claim to the First, Second and Fourth Defendants;

56.2. A sum representing the increase in the value of the Jewel as a result of the improvement work done on the property;

56.3 A sum representing the loss in the value of the business being operated from the Jewel;

56.4 The First Claimant claims the sums sought in paragraph 56.2 and 56.3 above to be quantified by way of an assessment of damages, albeit the First Claimant maintains this sum is at least £600,000.

57. In the alternative, if the court finds that there is no contract as between the First Claimant and the First, Second and Fourth defendants, the First Claimant claims the sum of £1,572,000 as money had and received, such sum being held on constructive trust by each of the Defendants as aforesaid. The First Claimant reserves its right to provide further voluntary particulars of the said trust after disclosure.

60. By making an offer to the First Claimant in the terms of the Agreement and by entering into the Agreement, or alternatively if the court finds there was no contract then otherwise by the facts and matters pleaded at paragraphs 10 to 14 above, the First and Fourth Defendants (acting on behalf of themselves and the Second Defendant) represented to the First Claimant that they were in a position to sell him the Jewel, or alternatively the entire issued share capital of a company owning the Jewel, free from encumbrance. That representation was false in that the said Defendants had already contracted with the Second Claimant by the Guarantee Agreement to give the Second Claimant a 15% interest in the Jewel. Further, the First Claimant relies upon the said Defendants' failure to disclose the facts and matters pleaded at paragraphs 5 and 6 above. The said representations induced the First Claimant to part with £1,572,000 and to undertake the works as aforesaid to the Jewel. Further, the said representation was fraudulently in that the First, Second and Fourth Defendants knew it to be false otherwise had no honest belief in its truth."

40. In my judgment the agreement that The Jewel was to be acquired unencumbered, or to put it another way that the purchase price of the shares in Prestige was to be abated by way of the Claimant taking over responsibility for the borrowing secured on The Jewel, appears sufficiently clearly and in particular from paragraphs 17 and 18 and the "worked example" at paragraph 23. It is also sufficiently clear that the structure of the agreement was that The Castle and the indebtedness associated with it was to be "extricated" from Prestige- paragraph 14.2. There would be no purpose in the severing of the loan and the separation of the bank's security into distinct loans and charges "to allow The Castle to be transferred out of the Third Defendant"- paragraph 17- were both The Castle and its associated indebtedness to remain in Prestige. This is spelled out in paragraph 18. The reduction in the price to reflect the Claimant's assumption of the borrowing secured on The Jewel could not however be finalised until it had been determined what proportion of the total sum lent to Prestige by the bank and currently secured on The Jewel and The Castle jointly would be left secured on The Jewel alone- paragraph 18. The premise of paragraph 18, spelled out in paragraph 17, is that that part of the indebtedness relating to The Castle would be identified, severed from the indebtedness related to The Jewel, The Jewel released from the charge in respect thereof and that part of the loan from the bank would go forward secured on The Castle alone which would be transferred out of Prestige into the First, Second and Fourth Respondents or into their nominee company. It is a statement of the obvious that Prestige had also to be relieved of the indebtedness relating to The Castle. That is plainly comprised within the assertion that "The Castle would be extricated from the Third Defendant"- paragraph 14.2. No-one was suggesting that The Castle would be transferred out of Prestige but the indebtedness relating thereto remain a liability of the company. Indeed, there would be only very limited purpose, and no sensible commercial purpose, in contemplating the severing of the loan and the separation of the security if the liability for the entire indebtedness was nonetheless to remain with Prestige.
41. The Deputy Judge was concerned that it was not pleaded that what was "envisaged" ever came to pass or was agreed. I do not share this difficulty, and am comforted to find that it was not shared by either Mr Sutcliffe QC or by Sales J. It seems to me plain that the word envisaged in context here means agreed, the pleader using the former word in order to describe the manner in which the parties contemplated that the underlying structure of their agreement would be worked out in practice. The situation was not straightforward since it required the co-operation of the bank if the loans and security arrangements were in fact to be re-structured. Absent co-operation of the bank, transfer of the shares on the terms agreed could only be achieved by monetary adjustment between the parties themselves. The logic of the objection of the Deputy Judge was of course that he should have declined to grant any relief to the Claimant on the basis that he had failed to plead a completed agreement. The Deputy Judge might perhaps have adopted that course had it not been for the fact that the Defendants accepted before him that an order for transfer to Mr Thevarajah of the remaining 50% of the shares in Prestige was appropriate. The Deputy Judge gave effect to that, but in so doing gave effect to part only of the agreement. In ordering transfer of the shares without monetary adjustment he left Mr Thevarajah encumbered with the entirety of the indebtedness. The indebtedness relating to The Jewel should have been reflected in an abatement of the price, but Mr Thevarajah had already overpaid £872,000 and that sum should have been ordered to be paid by the First, Second and Fourth Respondents either as damages or simply as the amount due upon an account as part of the decree of specific performance. Similarly, the Deputy Judge could not, if seeking to give effect to the intention of the parties, order transfer of the shares in Prestige without dealing also with the indebtedness referable to The Castle. This too should have been reflected in a payment by the First, Second and Fourth Respondents to compensate Mr Thevarajah for having imposed upon him a liability which it was never intended he should bear. However the Deputy Judge made matters worse. Paragraph 7 of the draft order appended to Mr Thevarajah's Application notice, set out at paragraph 22 above, recited that upon payment of the appropriate sums (£72,000 plus £2,057,837) Prestige would transfer, and Mr Thevarajah would cause Prestige to transfer, The Castle to such persons or entity as the First, Second and Fourth Respondents might nominate. The judge held, at paragraph 19, that:-

"The relief to which Mr Thevarjah is entitled as regards the part of the agreement relating to "The Jewel" is:

a) An order that the Defendants transfer to Mr Thevarajah the remaining 50% of the shares in PPD.

b) An order that Mr Theverajah procure the transfer of "The Castle" by PPD to the Defendants or such other person as they may direct at the same time as the transfer of the shares under (a).

c) Repayment of the £72,000."

To say that Mr Thevarajah was "entitled" to this relief implies that he had asked for it. He had not asked for the shares in Prestige to be transferred to him without a corresponding payment from the First, Second and Fourth Respondents to reflect the liabilities which he was thereby assuming. He had not asked to be required without compensatory payment to transfer The Castle out of Prestige. To require him so to do without requiring the First, Second and Fourth Respondents to make a compensatory payment meant that not only did Mr Thevarajah acquire an unintended liability but that he also lost the asset of Prestige to which it related and on which it was secured. The Deputy Judge recognised the consequences. He set them out at paragraph 20 of his judgment. They were, he said, the:-

"unavoidable consequences of asking the court to order implementation of an arrangement lacking (as pleaded, and perhaps in fact) agreement of an important element."

42. For the reasons I have given these consequences were entirely avoidable. The pleaded case was adequate. The Deputy Judge would not I think have concluded that the arrangement perhaps in fact lacked agreement of an important element had he not closed his eyes to the extent to which there was common ground on the pleadings, as reflected in the correspondence and in other important documents emanating from the Respondents, as for example the witness statement of their solicitor Mr Fletcher to which I have referred above.
43. Thus paragraph 11 of the Points of Defence pleads that the terms of the agreement included the following:-

"(a) The First Claimant would purchase the entire issued share capital in the Third Defendant at which time the assets of which would consist of The Jewel only.

(b) The Castle would be transferred out of the Third Defendant at the same time as or prior to the sale of the share capital of the Third Defendant to the First Claimant.

(c) The purchase price for the said shares in the Third Defendant would be £2,500,000 made up of £1,700,000 in cash and the First Claimant taking on the Third Defendant's borrowings on The Jewel with the Bank in the sum of £830,000."

To like effect are the following paragraphs:-

"21. Save that it is admitted that at this stage it was envisaged that part of the consideration in respect of The Jewel would be paid by way of the First Claimant taking over the responsibility for the borrowing secured on the Jewel (for the avoidance of doubt, it is the First, Second and Fourth Defendant's case that this was always the intention of the parties),…

50. … It is admitted and averred that it was always agreed between the parties that the purchase of the Jewel by the First Claimant was conditional upon him taking over the liability of the £800,000 loan on The Jewel."

44. There was never any doubt about either the basic shape of the agreement or what was alleged in Mr Thevarajah's pleadings. Thus in the Respondents' skeleton argument prepared for the hearing before Mr Donaldson QC it was stated at paragraph 21: "The particulars of claim at paragraphs 14.1 and 14.2 pleads that the Claimant was entitled to The Jewel free of any charges." Likewise the judgment of Mr Sutcliffe QC records at paragraph 4: "[The Claimant] says the properties were to be free of encumbrance or the purchase price otherwise adjusted."
45. As for correspondence, three examples from the Respondents' own solicitors' letters will suffice.

(1) Their letter dated 23 May 2013: "It is not nor has it ever been disputed that the Holloway Castle did not form any part of the deal between the parties… If your client is concerned about specific performance of the proposed deal there is no reason why this element cannot be dealt with now with our client remaining willing to take on the circa £1 million borrowing associated with The Holloway Castle thereby reducing the Company's exposure to the Bank of Cyprus."

(2) Their letter dated 28 June 2013: "The agreement envisaged your client retaining within the Company "The Jewel" and £830,000 of borrowing associated with it (for the purpose of the agreement) and our clients would transfer the Holloway Castle out of the Company together with the £1,030,000 borrowing associated with it."

(3) Their letter dated 2 December 2013: "As for the transfer of The Holloway Castle out of the Company our clients would be prepared, subject to contract, for The Holloway Castle to be transferred to them with £1,030,000 debt attached to it…"

46. Accordingly, I would allow the appeal and set aside paragraphs 1,2,4 and 5 of the Order of the Deputy Judge dated 21 March 2014. I would substitute therefor an order in the following terms, and invite the parties to agree or submit further written submissions on the question which dates should be inserted in the operative parts:-

1. "The First, Second and Fourth Respondents shall by ……..

1.1. state and certify the number of shares in the Third Respondent that they have a legal and/or beneficial interest in; and

1.2. transfer to the Appellant all legal and beneficial interest that they have in any issued shares in the Third Respondent.

2. Save as otherwise provided by paragraph 3 below the First, Second and Fourth Respondents do pay the First Appellant the sum of £2,204,976.40 together with interest at 8% from 4^th February 2015 pursuant to the Judgments Act 1838 (such sum being further to the sum of £72,000 ordered to be paid by paragraph 3 of the order of Mr D.Donaldson QC dated 21^st March 2014);

3. In the event that the Respondents are able to procure an offer from the Bank of Cyprus ("the Bank") to restructure the Third Respondent's borrowing with the Bank by a proposed transfer of the property known as The Holloway Castle Public House, 392 Camden Road, London N7 0SJ ("the Castle"), together with a transfer of a proportion of the said borrowing, to a person or entity nominated by the First, Second and Fourth Respondents, such that the Bank is prepared to reduce the sum due from the Third Respondent to it, the sum referred to in paragraph 2 above shall be reduced by the amount of the proportion of the borrowing transferred accordingly, provided that the Bank apply and give effect to such reduction by …………………..

4. Upon payment of the entirety of the sum referred to in paragraph 2 (and as varied by paragraph 3 if applicable), and provided such payments are made in their entirety before ……………………….., the Third Respondent shall transfer (and the Appellant shall caused the Third Respondent to transfer) the Castle to such person or entity as the First, Second and Fourth Respondents shall nominate as soon as practicable thereafter.

5. In the event that the entirety of the sum referred to in paragraph 2 has not been paid by …………………….. then the Appellant shall be at liberty to sell the Castle for fair market price and to apply the proceeds of sale towards the sums due from the First, Second and Fourth Respondents.

6. The freezing order of Mr D.Donaldson QC dated 21^st March 2014, and continued by order of Lord Justice Richards dated 10^th April 2014 shall remain in effect until all sums due pursuant to (i) this order, (ii) the order of this court dated 13^th December 2014, (iii) the order of Sales J dated 23^rd January 2015, and (iv) paragraph 6 of the order of Mr D. Donaldson QC dated 21^st March 2014 (which for the avoidance of doubt includes those sums due pursuant to paragraph 7 below) have been paid to the Appellant and until the Appellant has acknowledged that all such sums have been paid, or until further order of the court;

7. [costs]"

47. By a consent order sealed on 10 June 2014 this court ordered a stay of paragraphs 1 and 2 of the Order of the Deputy Judge pending the determination of this appeal. That stay will fall away on the making of the order I have proposed, and an application by Mr Theverajah dated 29 December 2014 for a variation of the stay becomes academic.

Costs of the Part 8 proceedings

48. A wholly separate point arises out of the refusal of the Deputy Judge to deal with the costs incurred in Part 8 proceedings issued by the Claimant in March 2013. In those proceedings the Claimant sought declarations pertaining to the directorships of, and shareholdings in, Prestige. This claim supported an injunction obtained by Mr Thevarajah on 28 March 2013 restraining the First and Second Respondents from holding themselves out as directors of Prestige. Thereafter the balance of the issues were the subject of the Part 7 claim with which the Part 8 claim was ordered to be heard. At trial the Claimant sought no relief on the Part 8 claim, it being unnecessary to do so given the indication that specific performance was regarded as appropriate. On the handing down of judgment the Claimant sought recovery of his costs incurred in that action on the basis that he had successfully obtained specific performance in the Part 7 claim, the Part 8 relief being an adjunct to ownership of the shares. It was common ground that the Part 8 claim was before the Deputy Judge but the Respondents resisted an order in respect of the costs thereof on the basis, as I understand it, that it was inappropriate as the Claimant had sought no relief thereunder. The Deputy Judge seems to have declined to deal with the matter on the footing that the Part 8 claim was not before him.
49. Mr Davenport does not as I understand it seek to uphold the Deputy Judge's conclusion in that regard, although he does point out that these costs could have been dealt with by bringing on the Part 8 proceedings for a costs determination in the Chancery Applications Court, and he reiterates the point that the Claimant sought no relief from the Deputy Judge in the Part 8 action. In my judgment the more practical and economical route was to invite the Deputy Judge to deal with the Part 8 costs without the need for a further application. At all events the costs of the Part 8 proceedings are now at large before us. In my judgment the appropriate order is that those costs should be dealt with in like manner as the costs of the Part 7 claim. It is not suggested that the Part 8 proceedings were superfluous or unnecessarily brought. The Respondents realistically accept, at paragraph 38 of their skeleton argument prepared for the appeal, that costs in respect of the Part 7 claim will follow the result of the appeal. Subject to any further argument concerning the costs of the appeal, I would award the Appellant the costs of both the Part 7 and Part 8 actions.

Mr Justice Newey:

50. I agree.

Lord Justice Richards:

51. I also agree.