England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		4th April 2007

Mr Justice Blackburne :

Introduction

1. These are applications by the third to fifth defendants ("the administrators") and, separately, by the sixth defendant ("RBS") to strike out under CPR rule 3.4, alternatively for summary judgment under CPR Part 24 in respect of, the claims brought against them by the claimants who sue in two capacities: first, as partners in a partnership known as J & H Kyrris ("the Partnership") and, second, as shareholders in J & H Kyrris Ltd ("the Company"). The claims, which are for damages for breach of duty and conspiracy (a claim against the RBS for breach of an agreement, although pleaded, is no longer pursued), are made in proceedings issued as long ago as 12 November 2002. Claims for breach of duty, breach of agreement and conspiracy, made against the first and second defendants (collectively referred to as "Burger King") and the seventh defendant were struck out by Etherton J on 7 February 2005. The claimants' appeal against Etherton J's order was dismissed by the Court of Appeal on 23 December 2005.
2. The claimants, who are siblings, carried on in partnership, through the Partnership, the business of franchisees and operators of Burger King fast food outlets. Their profit shares in the Partnership were reflected in their shareholdings in the Company which carried on a similar business. As between the claimants, the third claimant, Jacovos Kyrris (referred to as "Jack" Kyrris) held a 68% interest.
3. So far as material, there were thirteen outlets operated by the Partnership and six by the Company. By the time of the events with which these proceedings are concerned one of the Partnership's outlets, in York, had closed leaving twelve run by the Partnership and six by the Company. Each outlet was held under a lease which restricted use of the premises to that of a Burger King restaurant operated pursuant to a Burger King franchise agreement. The lease empowered Burger King (it is not necessary to distinguish between the various entities within the Burger King organisation) to forfeit, inter alia, if rent was unpaid or an administrator was appointed. The franchise agreement required the franchisee (relevantly, the Partnership in respect of its outlets and the Company in respect of its) to make so-called royalty payments. These were calculated as a percentage of gross sales for stated accounting periods. The franchise agreement was expressed to be terminable in various events. They included the franchisee going into insolvent liquidation or an administrator being appointed, or if the franchisee should fail to pay any sums due under the agreement within ten days of a demand stating that the franchisee was in default.
4. It is evident therefore, and was at the material time, that given the very restrictive user requirements and the forfeiture provisions set out in the leases coupled with the right of Burger King to terminate the franchise in the event of non-payment of royalties Burger King had the whip hand over the Partnership (and over the Company) as regards their ability to continue to operate at their respective Burger King outlets once an unremedied non-payment of rent or royalties should occur, or if either should be placed in administration.
5. In the course of 1996 the Partnership (and the Company) experienced increasing financial difficulties. These were caused in large part by the BSE crisis which led to restaurant outlets such as those run under Burger King franchises to suffer a fall in turnover. Another cause, so it was alleged by the claimants, was the overpricing of supplies to it by Burger King and the seventh defendant.
6. Rent and royalty arrears mounted up. On 6 November 1996 Burger King brought separate sets of forfeiture proceedings in respect of the subleases of each of the franchised restaurants operated by the Partnership on the ground of non-payment of rent and other sums due. The overall total involved was of the order of £800,000. The Partnership defended the proceedings and brought counterclaims. On 21 March 1997 Burger King launched further proceedings by issuing a claim against the Partnership for £521,000 odd in respect of arrears of royalties and other payments due under the various franchise agreements (the "franchise arrears"). This was followed, on 25 March 1997, by applications in those and the forfeiture proceedings for Mareva relief. Freezing injunctions were obtained restraining the disposal by the Partnership of assets up to a value of £2.045 million.
7. RBS was one of the bankers to the Partnership. The other was Barclays. The Bank of Scotland was banker to the Company. RBS had entered into loan arrangements with the Partnership and granted it overdraft facilities. With the service of a notice of default in early April 1997, £2.57 million was due and payable to RBS under the loan arrangements. The overdraft facility had by then been withdrawn. RBS held fixed charges to secure what was owing to it over seven of the Partnership's subleases. One of those outlets was in York which, with closure, ceased to provide any security. Another was at Meadowhall in Sheffield. With a recent rent review the Meadowhall premises had been rendered effectively valueless. The remaining premises could only be turned to profitable account if Burger King could be persuaded not to exercise its right to forfeit the subleases for non-payment of rent and was willing to continue to allow the premises in question to be operated as Burger King franchised outlets notwithstanding the non-payment of the royalties and other sums due under the franchise agreements.
8. Against that background and a failure, despite prolonged negotiations between the principal parties involved (the Partnership, Burger King and RBS), to reach an acceptable arrangement for the payment of the Partnership's arrears coupled with a restructuring of its banking and security arrangements, RBS was moved to commence its own proceedings. On 4 April 1997 it presented a petition for the making of an administration order in relation to the Partnership pursuant to the provisions of the Insolvent Partnerships Order 1994 and for the appointment of joint administrators. The petition was supported by Burger King which claimed to be owed £2.3 million, but opposed by the Partnership. By then the Partnership also had unsecured borrowings from Barclays which exceeded £1 million. On 27 April, following a contested hearing, Neuberger J made the order sought and appointed the administrators to be the joint administrators of the Partnership. The purpose of the administration was a more advantageous realisation of the Partnership's assets than would be effected on a winding-up.
9. In the meantime, on 15 April, Burger King had obtained leave from the Companies Court to continue the forfeiture and franchise arrears proceedings subject to an undertaking not to enforce any orders obtained without the court's leave prior to the hearing of the administration petition. Pursuant to that leave, summary judgment was obtained on 22 April 1997 against the Partnership for possession of the various subleased premises and for sums totalling £1.634 million. On 25 April 1997, two days before the effective hearing of the administration petition, the Partnership launched a counter- attack. It commenced proceedings against Burger King claiming damages in excess of £8 million. The claims included breach of an agreement relating to the Meadowhall premises, breach of article 86 of the EC treaty, breach of the franchise agreements, and unlawfully (and with the intention of harming the Partnership) permitting or encouraging the seventh defendant to withdraw credit terms of business with the Partnership.
10. On 6 May 1997, a few days after the making of the administration order, the Company went into administrative receivership. Partners in Coopers & Lybrand were appointed administrative receivers.
11. In June 1997 the administrators placed their statement of proposals for achieving the purpose of the administration before creditors at the meeting convened pursuant to section 23 of the Insolvency Act 1986. The proposals included (1) reaching an agreement with Burger King which would allow the administrators to continue to trade and realise all or some of the Burger King franchised restaurants, (2) selling all or any of the Partnership's assets as and when suitable offers were received and (3) making such application to the court as appeared appropriate to confirm the extent of the administrators' power to enter into an agreement with Burger King to compromise all and any outstanding causes of action the Partnership might have against Burger King, including in particular the claim under article 86 of the EC treaty. The administrators also sought approval to their incurring costs and expenses, including professional fees, the basis of their remuneration, and the establishment of a creditors committee. The meeting of creditors which took place on 24 June 1997 was attended by, among others, Mr Jack Kyrris and the first claimant. The proposals were put to the vote and overwhelmingly approved by creditors. Votes in favour totalled £2.82 million and against £276,000. Only four creditors voted against; 28 creditors voted in favour. Even excluding the Burger King debt, the vote was carried overwhelmingly.
12. On 2 July 1997, the Company, its administrative receivers and Burger King entered into an agreement for the compromise of all disputes, actions, claims, counterclaims, demands and grievances between the Company and Burger King ("the Company compromise agreement").
13. A question arose whether the administrators could and should enter into a similar compromise in respect of the Partnership's claims against Burger King. This was resolved when, on 21 July 1997, Evans-Lombe J gave directions authorising the administrators to seek relief from forfeiture in the forfeiture proceedings, take over conduct of the proceedings commenced against Burger King by the Partnership on 25 April 1997, and compromise all of those proceedings. Mr Jack Kyrris was present at the hearing and addressed the court through an adviser. He opposed the giving of directions, at any rate insofar as they concerned a compromise of the proceedings against Burger King commenced on 25 April 1997. He did so on the footing that the claim was not an asset of the Partnership. In the event Evans-Lombe J held, and there was no appeal against his conclusion, that the claim in question was indeed an asset of the Partnership.
14. With the benefit of those directions, on 19 August 1997, the Partnership, acting by the administrators, entered into an agreement with Burger King compromising in terms similar to those contained in the earlier agreement of 2 July 1997, the various disputes actions, claims, counterclaims etc between the Partnership and Burger King ("the Partnership compromise agreement"). The agreement contained the following, among other, terms: (1) that the administrators would thenceforth ensure that the Partnership complied with the subleases as if they had not been forfeited and with the provisions of the franchise agreements; (2) that upon the signing of the compromise agreement the franchise agreements would automatically terminate and be replaced by others (referred to as temporary franchise agreements) for a period ending on 31 December 1997; (3) (by clause 8) that the administrators would use all reasonable endeavours to ensure that the restaurants were disposed of together and as a whole if and insofar as the administrators believed that this would produce the best recovery but that, subject thereto, the administrators would use all reasonable endeavours to ensure that the sale was completed as soon as reasonably practicable and in any event by no later than 31 December 1997 and would be for the maximum realisation reasonably obtainable; (4) that, provided the terms of clause 8 should have been substantially complied with, Burger King would extend the 31 December sale deadline for such period as was reasonable in the circumstances then prevailing to enable the administrators to achieve a sale and would extend the temporary franchise agreements for a corresponding period; and (5) that, provided Burger King should have consented to any proposed sale of the restaurants and have approved the purchaser, then, upon completion of the sale and payment of the sums specified in schedule D, Burger King would consent to an order for relief from forfeiture of the subleases and to the assignment of the reinstated subleases and would enter into new 20 year franchise agreements with the purchasers in respect of the restaurants in question. The schedule D payments comprised (1) the sublease arrears and all other sums then due pursuant to the terms of the subleases; (2) the franchise arrears and all other sums then due pursuant to the terms of the franchise agreements and temporary franchise agreements; (3) interest as provided for in the judgment dated 22 April 1997 and in the franchise agreements and temporary franchise agreements; (4) Burger King's costs of the agreement and (5) certain payments due to the seventh defendant.
15. By late July 1997 steps were underway to effect a sale of the Partnership's restaurant premises, by then numbering twelve (including Meadowhall). The ability to achieve a sale depended on reaching an agreement with Burger King for which the court's directions had been sought. The plan was to sell the premises together with the eleven Burger King restaurants owned and operated by an unrelated company called Genesis Fast Food Ltd ("Genesis"), making twenty-three in all. Genesis was likewise in financial difficulties. It went into administrative receivership on 11 September 1997 when Michael Oldham, the third claimant, and one other were appointed joint administrative receivers. The fact that Mr Oldham was both a joint administrator of the partnership and a joint administrative receiver of Genesis has since become a focus for criticism by the claimants.
16. Already in late May, the administrators had obtained advice from Weatherall Green & Smith ("Weatheralls") concerning the disposal of the Partnership's premises. In what they described as a "preliminary report" dated 27 May 1997 Weatheralls gave their opinion on the open market value/estimated realisation price of the Partnership's twelve premises. Ignoring Meadowhall which they considered to have no realisable value on the open market as a Burger King outlet, they estimated the open market value of the Partnership's premises to lie between £3.1 million and £3.6 million. Weatheralls emphasised that their advice was on the basis of limited information and that in view of the terms of the subleases from Burger King and the franchise agreements "Burger King is … under no obligation to behave reasonably … and without their express co-operation, these underleases [ie the Partnership's subleases] will have no realisable value on the Open Market if separated from the Burger King franchise…". With the obtaining of the court's directions on 21 July 1997 and the entry into of the Partnership compromise agreement with Burger King on 19 August 1997, the way was now open to the administrators to proceed to a sale of the Partnership's premises.
17. Starting in September and continuing into October 1997, the Partnership's twelve premises together with Genesis's eleven were offered for sale on the joint instructions of the administrators and the administrative receivers. Marketing was by a combination of advertisements in the Financial Times, Daltons Weekly and elsewhere, and by direct mail shots and other means. The marketing was not confined to this country but extended to the US and mainland Europe. In due course Mr Oldham reported in writing to the committee of creditors which had been appointed at the Partnership's section 23 meeting. This disclosed that the advertising had resulted in just over two hundred persons expressing an interest. These were whittled down to just over one hundred to whom further information was then sent. Following that, offers were received from ten bidders. The highest four were then shortlisted. They included Allied Leisure and Holroyd/Dixon. Of the two others, one subsequently withdrew its offer (in late November) and the other did not pursue the matter. Allied Leisure and Holroyd/Dixon, the two remaining bidders, were then invited to provide final offers by 3.00 pm on 11 December 1997, the offers to be broken down between each restaurant.
18. In the event, only Allied Leisure submitted a final offer. Holroyd/Dixon withdrew. Allied Leisure's final offer, dated 10 December 1997, was £6.65 million for the twenty-three premises. The offer was expressed to be subject to due diligence and stated that the two groups had been valued "with a resultant premium for critical mass and scale". Meadowhall was included "provided Burger King grant us an option to hand back the unit on 30 days notice at any time during the first two years of our operation".
19. Six days later, on 16 December, Allied Leisure wrote to Mr Oldham to say that they were still interested "despite the renewed BSE scare, provided any transaction can … be brought to a speedy conclusion". By then Allied Leisure had already paid £2.325 million for the Company's six premises. A schedule, which was attached to Allied Leisure's letter but was missing from the papers before the court until I asked to see a copy, split the overall figure between the eleven Genesis properties, attracting together a figure of £2.438 million, and the eleven Partnership premises, attracting together a figure of £4.212 million. Individual figures were given for each restaurant. No value was attached to Meadowhall. The letter stated that Allied Leisure had been approached by Holroyd/Dixon with a view to that consortium acquiring eight of Genesis's premises and one of the Partnership's. These were all premises located on the west of the Pennines. Any sale to Holroyd/Dixon was to be on the footing that they would meet the price for those premises that Allied Leisure was offering and provided Burger King agreed. Allied Leisure's letter indicated that Allied Leisure was inclined to view the offer favourably as it would enable it to focus its own activities to the east of the Pennines. It suggested that if the sale to Holroyd/Dixon proceeded it made sense for Holroyd/Dixon to deal directly with the Partnership/Genesis to avoid complicated property and warranty assignments but that Allied Leisure would guarantee completion.
20. Receipt of this letter by Mr Oldham appears to have prompted a telephone conversation which was followed on 17 December by a further letter from Allied Leisure to Mr Oldham. Attached to this further letter was a revised schedule varying the allocation of value across the various premises. The letter continued:

"I can only apologise for the administrative 'cock up' which resulted in the old/out of date/incorrect allocation based on historical data to be attached in error. The revised schedule attached is the correct allocation and is based on our forward projections.

I would be grateful if you could destroy the original schedule sent in error and insert the attached schedule in its place.

In summary our allocation of value is £3,038,000 for [Genesis] and £3,612,000 for [the Partnership], a total of £6,650,000."

21. Minutes of the Partnership's creditors committee dated 18 December 1997 show that Allied Leisure's revised offer letter of 17 December was reported to the meeting. The minutes indicate that it was pointed out that estimates based on £3.812 million for the Partnership's premises (to which there was to be an additional £200,000 available by way of deferred consideration) meant that there would be no funds available for distribution to unsecured creditors. It was also explained that capital expenditure of £242,000 was required to meet Burger King's minimum requirements for improvements to the restaurants arising from an audit undertaken immediately after the administrators' appointment and that additional expenditure had been incurred to meet Burger King's compliance requirements for franchise status. In particular it was pointed out that Allied Leisure's offer would need to increase by over £800,000 to clear preferential creditors before any payments would arise for the unsecured creditors. Mr Oldham is also reported as referring to Weatheralls' earlier valuation indicating the spread of value as between the Genesis and Partnership premises. The minutes reported a lively debate on whether the Allied Leisure offer for the Partnership premises should be accepted. The four-man committee was evenly split with RBS in favour of getting Allied Leisure to increase its offer. Burger King, which was also represented at the meeting, later indicated that it would not agree to any extension of the 31 December deadline for further marketing. The minutes then reported:

"Having taken legal advice [from DLA] on their position, the Administrators accepted, subject to contract, the revised offer from AL which had improved by some £200,000 following negotiations with the Administrators and represented the only realistic proposal available."

22. As matters turned out, only eleven of the twelve Partnership premises were sold to Allied Leisure as the restaurant in Oldham was sold direct to Holroyd/Dixon for the £162,000 which Allied Leisure had offered for it (as part of its overall offer for the Partnership and Genesis premises). This was as a result of the separate arrangements referred to earlier (and reported to the meeting of creditors) between Allied Leisure and Holroyd/Dixon for the purchase by Holroyd/Dixon of those restaurants which were situated west of the Pennines.
23. In fact the sale to Allied Leisure was not completed until early in 1998. For that purpose Burger King gave a short extension to its 31 December 1997 deadline.
24. Despite having charges over five of the Partnership's eleven premises sold to Allied Leisure, RBS only received £100,000 in respect of its security interests. This appears from the administrators' abstract of receipts and payment to 11 October 2001, the date of the discharge by Pumfrey J of the administration order.
25. I have set out the exchanges between Allied Leisure and the administrators in some detail, together with what was reported to the meeting of creditors because, as will hereafter appear, the claimants regard with suspicion the changes made by Allied Leisure to the split as between the Partnership and the Genesis premises of the overall price which Allied Leisure was offering.
26. The administrators' application for their release was considered by Pumfrey J at the same time as they applied for the discharge of the administration order and petitioned for the Partnership to be wound up. The application for their release was opposed by Mrs Georgina Kyrris, wife of Mr Jack Kyrris and by Mr Mario Royle, the husband of the first claimant. Those two persons claimed that they had charges over two of the Partnership's premises and that the administrators had improperly failed to provide for them. The matter was disposed of on the basis that the administration order was discharged, a winding-up order of the Partnership made and, with the exception of the claims by Mrs Kyrris and Mr Royle for which special provision was made, the administrators obtained their release except in respect of "any claim notified by any person …to the Joint Administrators by 28 days after the filing of the Joint Administrators' final receipts and payments account". The 28-day period expired, I understand, on 18 December 2001.
27. In the event, by letters dated 14 November and 23 November 2001, which was within the 28-day deadline, the solicitors then acting for the claimants notified the administrators' solicitors of what in the letter of 14 November was described as "a large number of issues, including compromise of the proceedings against Burger King in breach of duty and disposal of the assets of the partnership at undervalue". The letter was not specific about what the other claims were. It mentioned that discussions were taking place with a view to the claimants obtaining an assignment of the Partnership's causes of action and that discussions were also taking place with the Company's liquidator (it had been in creditors' voluntary liquidation since 10 October 1997) with a view to obtaining an assignment of the Company's causes of action. The letter of 23 November was no more specific.

The claims

28. In fact another 12 months were to pass before, on 12 November 2002, a claim form was issued. On 20 February 2003, particulars of claim were served and the claim form was amended. The claim was against the two Burger King companies (as first and second defendants), the administrators and RBS (as the third to sixth defendants) and HM Group Ltd, formerly Holroyd Meek Ltd (as the seventh defendant).
29. As against Burger King the pleaded claims alleged (1) breaches of express and implied terms of the franchise agreements; (2) breach of an oral agreement made on 17 January 1997 relating to the Meadowhall premises; (3) abuse of a dominant position within the meaning of article 86 of the EC Treaty; (4) a conspiracy ("the narrower conspiracy claim") between Burger King and seventh defendant involving breaches of the franchise agreements, breach of a supply agreement by the seventh defendant and breach of article 86; (5) a conspiracy ("the wider conspiracy claim") between Burger King and each of the other defendants; and (6) breach of a duty of utmost good faith on the part of one of the Burger King defendants when applying for the Mareva injunction in 1997. As against the seventh defendant, the claims alleged were (1) breach of the supply agreement (being an agreement for the supply of products to the Partnership and the Company entered into after the seventh defendant had been appointed authorised distributor of products to all franchised Burger King outlets in the UK); (2) the narrower conspiracy claim; and (3) the wider conspiracy claim.
30. As against the administrators the pleaded claims alleged (1) the wider conspiracy claim; (2) breach of duty in selling Partnership assets at an undervalue ("the sale at an undervalue claim"); (3) breach of duty in abandoning (by the Partnership compromise agreement) claims which the Partnership had against Burger King ("the claims abandonment claim"); and (4) breach of a duty to manage the Partnership business with reasonable skill and care ("the business management claims"). The business management claims were under eight headings, namely (a) failing to implement an agreement in relation to the Meadowhall premises prior to the sale to Allied Leisure, (b) spending a disproportionate and excessive amount on repairs, (c) spending an excessive amount on wages and salaries, (d) failing to produce sufficient profit, (e) mismanaging the levels of "local store marketing", (f) failing to account for certain equipment installed by the Partnership on the Meadowhall premises, (g) incurring excessive legal costs and (h) paying themselves excessive and/or disproportionate fees.
31. As against RBS the pleaded claims alleged (1) breach of a contract alleged to have been entered into between the Partnership, Burger King and RBS on 13 November 1996; (2) breach of a duty when giving certain advice to the Partnership ("the wrongful advice claim"); and (3) the wider conspiracy claim. In the course of the hearing before me Mr Green indicated that the breach of contract claim was no longer pursued. The wider conspiracy claim, it will be observed, was alleged against all of the defendants.
32. The particulars of claim plead that the sale of Partnership assets at an undervalue and the abandonment of the Partnership's claims against Burger King were breaches of duty owed to the Partnership not just by the administrators but also by RBS. But the factual allegations which follow each claim make clear that the claims lie against the administrators alone. Specifically, RBS was not, and is not alleged to be, a party either to the sale of the Partnership assets or to the Partnership compromise agreement. I need not therefore consider those claims any further insofar as they are expressed to lie against RBS.
33. As I have already mentioned, the claims were brought by the claimants in two capacities, first, as partners in the Partnership and, second, as shareholders in the Company.
34. As regards the claim brought as partners in the Partnership, the claimants rely on rights granted by an assignment dated 12 November 2002, the very day the claim form was issued. As regards the claims brought as shareholders in the Company, the claimants plead that the Company went into liquidation in 1997 as a result of the conduct of the defendants "as hereinafter pleaded" and that "the liquidator does not have the funds to bring proceedings for damages against the Defendants or any of them". See paragraph 1 of the particulars of claim.

The strike out/summary judgment applications by Burger King and the seventh defendant

35. On 13 June 2003, the seventh defendant applied to strike out or enter summary judgment on the claim against it. On 14 July 2004 a similar application was made by Burger King. The applications came before Etherton J who gave judgment on them on 7 February 2005. He held, inter alia, (1) that the claimants had no locus to bring the claims brought by them as shareholders on behalf of the Company; (2) that, in any event, any claims that the Company might have against Burger King had been surrendered by the Company compromise agreement (entered into on 2 July 1997) and that, as a result of the release of Burger King by that compromise from the narrower conspiracy claim, the seventh defendant, as an alleged co-conspirator, was also released; (3) that the Partnership compromise agreement (entered into on 19 August 1997) had the effect of disposing of the Partnership's claims against Burger King and, as a consequence, against the seventh defendant as well; (4) that, on the basis of the undisputed evidence before him (as set out in paragraph 60 of his judgment), there was no pleaded basis which had any real prospect of success for the wider conspiracy claim (in effect that the Partnership compromise agreement was invalid and could not be relied upon as it had been entered into as part of a conspiracy between, inter alia, the administrators and Burger King) or for setting aside the Partnership compromise agreement on the two other grounds relied upon (non-compliance with the provisions of the Insolvency Act 1986 or economic duress); and (5) that the breach of contract claim against the seventh defendant, whether as pleaded or as proposed, had no real prospect of success either.
36. The claimants appealed against that decision. They did so with Etherton J's permission. The Court of Appeal dismissed the appeal. In the course of his judgment (with which the two other members of the court agreed) Chadwick LJ referred to and cast no doubt upon the conclusion of Etherton J that the claimants had no locus to pursue the Company's claims in that there had been no assignment to them of those claims by the liquidator and there was no basis on which, on the evidence, the claimants could claim derivatively. He saw no basis for questioning Etherton J's other conclusions.
37. As regards the wider conspiracy claims involving, inter alia, the administrators, Chadwick LJ said this:

"28. The first question, as it seems to me, is whether the judge was right to hold that there was no real prospect of success in the claim that the partnership administrators were party to the alleged conspiracy. That, as it appears from the judge's note of his reasons for giving permission, really lies at the core of the claimants' complaint. They have no complaint if the administrators were acting properly and independently in the execution of their functions. But if they could show that the administrators were themselves party to the conspiracy to injure which they allege then they should be able to bring their claims."

Chadwick LJ then analysed the pleading of the wider conspiracy claim, reviewed what Etherton J had described as "the undisputed facts" and concluded (at paragraph 34):

"So the undisputed facts on which the judge relied can, properly, be treated as undisputed. They are facts which will be made good if there were a trial of these proceedings. If those facts were made good - so that it was against that factual background that the administrators entered into this compromise agreement in August 1997 - there is no prospect that a claim that the administrators were parties to a conspiracy could succeed."

38. The court therefore held that as on the undisputed facts there was no prospect of showing at trial that the administrators were parties to the wider conspiracy, the wider conspiracy claim, which depended upon demonstrating that the administrators were parties to it, had no real prospect of success against Burger King as one of the other alleged parties to it. For the same reason, the wider conspiracy claim as against the seventh defendant had no real prospect of success either.

The claimants' application to rely on a further witness statement of Mr Jack Kyrris

39. Before coming to the claims against the administrators and RBS and the applications to strike then out or enter summary judgment on them, I must first deal with another of the applications which was before me. This was one by the claimants, dated 7 February 2007 and issued the following day, seeking permission to rely on a third witness statement of the third claimant, Mr Jack Kyrris. The witness statement ran to 40 pages and was accompanied by a 475-page exhibit. The application was opposed by the administrators and RBS. The witness statement itself was served on the defendants on Friday, 9 February. That was three working days before the start of the hearing before me. After hearing submissions on whether I should admit this late evidence I ruled on 16 February (the third day of the hearing) that I would not. I indicated that I would give my reasons later for the ruling. These are the reasons. I begin with the background.
40. RBS's application to strike out the claims against it was issued and served with its supporting evidence as long ago as 9 September 2005. On 13 October 2005 Peter Smith J directed that the claimants serve their evidence in answer by 11 November 2005 and that the RBS's application be listed for hearing on a date not before 23 January 2006. Those directions were made having regard to representations made by the claimants' then solicitors.
41. It appears that on or about 27 January 2006, the claimants' legal aid funding was discharged.
42. On 2 February 2006, RBS's application was listed for a hearing in a three-day window commencing on 13 June 2006. That listing took account of representations made by the claimants' solicitors who had requested that the hearing should not take place before the end of May.
43. On 29 March 2006, the Funding Review Committee of the Legal Services Commission rejected the claimants' appeal against the discharge of their certificate.
44. On 25 May 2006, the administrators issued and served their application to strike out, with supporting evidence. That application came before Warren J on 7 June 2006 when directions were given for the service of evidence in, and the listing, of the application. The claimants were required to file their evidence by 7 September 2006.
45. On 9 June 2006, Mr Jack Kyrris issued an application to adjourn the hearing of RBS's strike out application. The application came before Kitchin J on 12 June 2006. He adjourned the hearing of RBS's strike out application, directed that the hearing be re-listed on a date not before 18 October 2006 and directed Mr Jack Kyrris to serve and file his evidence by 7 September 2006. The effect was that the evidence in answer to the two strike out applications was to be served and filed by 7 September 2006. Shortly thereafter the hearings of the two applications were listed for a window starting on 12 December 2006.
46. In early August 2006, the claimants issued an application in the Administrative Court for permission to challenge the Funding Review Committee's decision. The application was made five weeks out of time.
47. On 12 and 13 October 2006, not having been served with any evidence in answer by or on behalf of the claimants on their respective strike out applications (the deadline for doing so having expired on 7 September 2006), RBS and the administrators issued applications for debarring orders. In opposition to that relief, Mr Jack Kyrris made a witness statement on 23 October 2006 in which he attributed the claimants' default to the failure of the court to determine their application for judicial review. He sought an adjournment of the December hearing of the strike out applications.
48. Those applications came before Lewison J on 24 October 2006. Lewison J made unless orders and refused to adjourn the hearings of the strike out applications. In his judgment ([2006] EWHC 3161(Ch)), the judge considered that the claimants' delay was culpable. He concluded, however, that "it would be right to give the Claimants one last opportunity to put in further evidence". The order required the claimants to serve their evidence by 4.00 pm on Tuesday 14 November 2006 failing which they would be debarred from adducing evidence on the strike out applications.
49. On 14 November 2006, but after 4.00 pm, the claimants served their evidence with took the form of a second witness statement by Mr Jack Kyrris. In paragraph 3 of that witness statement Mr Kyrris stated that the statement "is my initial response to the strikeout applications. I intend to serve further evidence once I have funding to do so." Having then referred briefly to his modest origins, limited education and to being unemployed and without financial resources, he observed that neither he nor the other claimants had personal means to pay lawyers to conduct their case. He mentioned that they had been able to borrow "relatively small amounts of money from friends and other relatives" in order to fund their solicitors to carry out work on the applications. He complained that it was "because of the unlawful acts of the Defendants that I now find myself in a position where I am unable to afford to seek redress against them." He stated later that he readily accepted that his statement was "not as full as I would wish it to be and that for reasons of both funding and my previous solicitors retaining papers for legal aid assessment, I am not in a position fully to answer the factual allegations" raised by RBS and the administrators.
50. On 22 November 2006, the claimants issued an application seeking an adjournment of the December hearing and an order that there be a trial of preliminary issues. The application was supported by a witness statement from their solicitor. There was no application for permission to adduce further evidence. On 29 November 2006 Lightman J adjourned the three applications (ie the two strike out applications and the claimants' application for a trial of preliminary issues) and directed that they be re-listed for hearing in early to mid-February 2007. All parties were content with this date and the applications were listed shortly after that hearing. It is on that listing that the applications came on for hearing before me starting on 14 February.
51. On 18 December 2006, Davis J, sitting in the Administrative Court, dismissed the claimants' application for permission to challenge the Funding Review Committee's decision to refuse legal aid. He did so on two grounds: first, because it was out of time by almost five weeks with no satisfactory explanation for the delay, and, second, because there was no basis for any realistic argument for saying that the Funding Review Committee reached a conclusion which they were not entitled to reach. A central part of the application was the wish of the claimants to formulate and serve amended particulars of claim but that they were without the necessary funding to enable them to do so. Davis J referred to the fact that at an earlier hearing of the review application on 30 November, the judge hearing that application, Collins J, had directed the claimants to produce and put to the Legal Service Commission amended particulars of claim for its further consideration, warning the claimants that if they failed to do so their review application "will be bound to fail". (Already in February and May 2006, the claimants' solicitors had indicated that the claimants intended to amend their particulars of claim.) The claimants, however, failed to comply with that direction or to heed the warning.
52. On 5 January 2007, the administrators served a short witness statement in reply in the proceedings. RBS has not served any evidence in reply to the short second witness statement of Mr Jack Kyrris. It has been content to rely on its evidence served in 2005.
53. On 19 January 2007, RBS's solicitors asked the claimants' solicitors to state whether it was their clients' intention to adduce further evidence, pointing out that they were in any event debarred from doing so. A week and a half later, on 31 January 2007, the claimants' solicitors replied stating that they had sent that evening a bundle of documents "which we anticipate will be the exhibit to the Third Claimant's further witness statement". They indicated that that further statement would be served "as soon as possible early next week" and that the statement would "inter alia, respond to the second witness statement dated 22 December 2006 of Mr Schofield" filed on behalf of the administrators. The letter went on to state that the claimants intended to apply for permission to introduce the further statement "at the start of the imminent hearing".
54. The bundle of documents referred to in that response arrived on 1 February 2007. Further documents continued to be sent as late as 9 February 2007 when the witness statement itself was finally sent. The application to be allowed to adduce the further witness statement was issued on 8 February.
55. I was willing to allow the claimants to rely on Mr Jack Kyrris's second witness statement notwithstanding its service on 14 November 2006 shortly after the 4.00 pm deadline fixed by Lewison J's order of 24 October. Indeed, the defendants did not suggest that the claimants should not be free to do so.
56. Contrary to the impression given by the letter dated 31 January 2007 from the claimants solicitors' indicating that the further witness statement was mainly, if not exclusively, in response to Mr Schofield's second witness statement, the 40 page third witness statement of Mr Jack Kyrris served on 9 February 2007 was largely in response to the first (and in the case of RBS the only) round of evidence served in support of the two strike out applications. Indeed, the witness statement devotes 15 pages to answering RBS's evidence which had been served as long ago as 9 September 2005 (ie 17 months earlier) and nine pages to answering the administrators' evidence served almost nine months earlier. Only two paragraphs, which in any event were no more than comment, were devoted to Mr Schofield's second witness statement. Much of the remainder was general background.
57. In deciding whether to admit the further witness statement, notwithstanding the terms of Lewison J's order of 24 October 2006 making clear that the claimants should not be permitted to rely on any evidence served after the deadline of 4.00 pm 14 November 2006, my attention was drawn to the terms of CPR rule 3.9, the notes to that rule and to passages in the judgment of Arden LJ in CIBC Mellon Trust Company v Stolzenberg [2004] EWCA Civ 827 (especially paragraphs 153 to 167) concerned with the correct operation of the relieving power contained in that rule.
58. In support of the application to admit Mr Kyrris's third witness statement, Mr Green drew attention to the seriousness for his clients' claims (namely that they risk being struck out), and therefore to the importance to his clients, of being permitted to rely on the further witness statement. He drew attention to the claimants' funding difficulties - a result, the claimants contended, of the defendants' wrongful conduct - and to the fact, referred to in the third witness statement, that as recently as 2 February 2007 a relative of the claimants in Cyprus had made a loan available to cover the claimants' legal costs of the hearing before me. He submitted that admitting the evidence would not cause any serious prejudice to the defendants. He submitted that the interests of justice weighed in favour of admitting the witness statement.
59. Mr Charles Hollander QC and Mr Peter Arden QC (appearing, respectively, for the administrators and RBS) submitted that to allow the further witness statement to be admitted so very late in the day placed their respective clients in a dilemma: there was much in the witness statement which they would wish to challenge and reply to, but they realised that this could not be done without a further adjournment; on the other hand, the hearing of their applications had already been previously adjourned at the claimants' request (twice in the case of the RBS application), the claims against the defendants made serious allegations affecting the honesty and professional competence of senior RBS employees and of the administrators themselves, and there was naturally a wish that their strike out applications be determined without further delay. They submitted that no adequate explanation had been put forward for the delay in producing the further witness statement and that the claimants' conduct in submitting evidence late in the day and indicating a belated wish to follow a change of approach to their claims had been criticised by Etherton J, Collins J and Davis J at earlier stages of the overall proceedings. They pointed also to the wholly inadequate evidence about the funding difficulties from which the claimants said that they suffered. They drew attention to a passage from the judgment of Lewison J (when making his order of 26 October) criticising the absence of evidence of the claimants' means (insofar as that had been relied upon as an excuse for the delay in serving their evidence) and to the fact, also adverted to by Lewison J, that lack of funding had not prevented Mr Jack Kyrris from having legal representation from June 2006 to mount his unsuccessful challenge to the discharge of his legal aid.
60. I have carefully considered the check-list of matters referred to in CPR rule 3.9(1). Taking those which are of particular relevance to the exercise of discretion in this case, I am of the view that there has been no good explanation for the claimants' delay in serving Mr Kyrris's third witness statement and therefore for seeking the court's indulgence to allow that evidence to be admitted. I am of the view that the interests of the administration of justice are evenly balanced for and against admitting the further evidence. I am willing to assume in the claimants' favour that their failure to serve the evidence until so late was not intentional and that, apart from earlier failures by them to observe timetables fixed for the service of their evidence, the claimants have not otherwise acted in disregard of any relevant rule, practice direction, court order or protocol. I am also willing to assume that the delay has not resulted from any failure by the claimants' legal representatives. I also bear fully in mind the consequences of refusing to admit the further evidence.
61. Standing back, I am in no doubt that the claimants' application should be refused. Two matters above all weigh with me in reaching this conclusion. First, there is the absence of any satisfactory evidence of the funding difficulties which are said to underlie the delayed production of the third witness statement. Simply to assert a lack of means as the prime reason, which is in effect what Mr Jack Kyrris does, is by no means sufficient in the face of his ability to secure legal representation to make his unsuccessful judicial review application. Second, there is the absence of anything in the third witness statement to indicate why the matters set out in it could not have been put in evidence months previously. I am also concerned that RBS has waited patiently for nearly a year and a half to have its application heard. It would be quite wrong to require it to choose between foregoing the chance to reply to the further evidence (in order to avoid any further delay in the hearing of its application) and asking for this hearing to be adjourned yet again, to enable it (and the administrators who have already had to wait nearly nine months) to file further evidence in reply.
62. Those then being my reasons for declining to allow the further witness statement to be relied upon, I now turn to the defendants' substantive applications for final relief.

The jurisdiction

63. I preface what I say, and this applies to all of the claims, by stating that I have had regard to the very helpful summary of the court's jurisdiction under CPR rule 3.4 and CPR Part 24 set out in the annex to Mr Green's skeleton argument. I remind myself, as Etherton J reminded himself when striking out the claims against Burger King and the seventh defendant, that the applications to strike out which are before me cannot succeed unless it is clear that the claims against the administrators and RBS (as the case may be) have no real prospect of success. This does not mean that it must be shown that the claims are more likely than not to succeed. On the other hand the court must be satisfied that the prospects of success are not merely fanciful or imaginary. A case which is just arguable is not sufficient. In particular, it is not enough to maintain, as Mr Green did more than once, that it was "not fanciful to contend" that such and such occurred. Or that such and such a matter was not inherently improbable.
64. I also make clear that I have approached the matter by reference to the claims as pleaded. The question which I have to determine is not whether the defendants' conduct of matters was open to this or the other criticism but whether, in the respects pleaded in these proceedings, the defendants demonstrate that the claims against them disclose no reasonable grounds for being brought or are otherwise without any real prospect of success. In applying these tests I have borne in mind whether, by suitable amendment (assuming that there is a sufficient factual basis where allegations of fact are in play), it would be open to the claimants to maintain a claim which is otherwise liable to be struck out.

The claimants as shareholders in the Company

65. For the same reasons as Etherton J gave (without adverse comment by the Court of Appeal) when striking out the claims against Burger King and the seventh defendant in respect of loss alleged to have been suffered by the Company, I am unable to see that the claimants have any entitlement to bring claims in respect of loss alleged to have been suffered by the Company as a result of acts or omissions by the administrators and RBS. The Company has not assigned to the claimants any claims it may have had. It is now far too late to obtain such an assignment. There is no basis for bringing a derivative claim. In any event, no permission has been sought to do so.
66. Nor for good measure can I see any basis for the claimants suing in respect of loss allegedly suffered by them separate from that suffered by the Company. Mr Green submitted that the general rule preventing a shareholder from seeking to recover for what in truth is merely reflective loss, which he accepts is otherwise applicable to any claims which the claimants bring as shareholders of the Company, should not apply where what is alleged is, as he described it, an "intentional tort" and where the intention is to cause loss to a shareholder via the company in question. He accepted that there is no authority to support such an exception. In my judgment, there is no such exception. It is in my view irrelevant to the application of the rule that the damage suffered by the Company is intentional as distinct from merely accidental.
67. It follows that the claimants have no entitlement to sue in respect of any damage suffered by the Company.

The claimants as former partners of the Partnership

68. I have already summarised (at paragraphs [30] to [32]) the pleaded claims against the administrators and RBS.
69. Unlike the Company, which did not assign to the claimants any claims which it had or believed it had against the administrators and RBS (or against anyone else), the Partnership, acting by its liquidator, did enter into an assignment. The assignment, which is dated 12 November 2002 (the very day the claim form in these proceedings was issued) and was made between (1) the Partnership, (2) the liquidator of the Partnership and (3) the four claimants, was an assignment not just of claims against the administrators and RBS but also of claims against Burger King. By recital 3 it was stated that:

"The Assignor is alleged to have potential causes of action against inter alia [Burger King], its former administrators PKF and Royal Bank of Scotland. These causes of action are collectively referred to herein as 'the Asset' and are more particularly described in the letters before action set out at schedule 1 annexed hereto."

The operative part of the assignment provided, by clause 2, that:

"The Assignor [ie the Partnership] acting by the Liquidator assigns absolutely to the Assignees [ie the claimants] pursuant to the Liquidator's statutory power of sale under paragraph 6 of Schedule 4 to the Insolvency Act 1986 and all other relevant statutory powers such right title and interest in the Asset as the Assignor may have at the date hereof."

70. Schedule 1 set out the letters before action to Burger King, the administrators and RBS. The letter before action to the administrators, after setting out some background, alleged that the administrators "were negligent in a number of respects in the conduct of the administration". After setting out some more background, culminating in the Partnership compromise agreement, the letter continued:

"Our clients allege that you were negligent in compromising those proceedings [ie the proceedings brought against Burger King] on that basis [ie as per the Partnership compromise agreement]."

The letter then went on to give particulars of that claim. The letter continued that "The second main complaint is that you sold the business at an undervalue". It then gave particulars of that and continued "Our clients also allege that you were negligent in the running and sale of the business". The letter then set out six particular matters of complaint under that heading.

71. There was no complaint in the letter that the administrators were parties to any conspiracy. Moreover, the complaint of mismanagement of the Partnership business extended to some but not to all of the matters set out in the particulars of claim: in particular, the letter did not indicate any claim that the administrators had drawn excessive remuneration.
72. The letter before action to RBS, forming the next part of schedule 1, made only two complaints against RBS. The first was that in June 1996 it had demanded that the Partnership stop paying Burger King and ask for a recovery plan. It also alleged that RBS, through a Mr Penfold, advised against the issue of a writ against Burger King. Then, after complaining that RBS disputed the existence of the agreement said to have been entered into on 13 November 1996, the letter alleged that RBS was in breach of duties owed by it to the claimants, first, in respect of the advice not to pay Burger King and second, in the light of the alleged agreement of November 1996. As with the letter before action to the administrators, there was no complaint that RBS was party to any conspiracy.
73. Mr Hollander and Mr Arden submit that, there being no assignment to the claimants of any cause of action in conspiracy that the Partnership may have, it is not open to the claimants to bring proceedings against the administrators and RBS alleging loss and damage to the Partnership in consequence of a conspiracy. In particular, they draw attention to the fact that, in contrast to the letters before action to the administrators and RBS, the letter before action to Burger King does indeed refer to a claim in conspiracy. It cannot therefore be said that the possibility of a claim in conspiracy was not in the minds of those who drafted the letters before action. The inference, they submit, is irresistible: the letters before action did not intend to allege any claims in conspiracy against the administrators and RBS. Since the Partnership, acting by its liquidator, was only assigning the causes of action referred to in the letters before action (see the definition of "Asset"), it follows that there was no assignment by the Partnership to the claimants of any claims in conspiracy against the administrators and RBS.
74. In my judgment, this is an insuperable hurdle to the claimants' wider conspiracy claim, to which Mr Green on behalf of the claimants had no answer. It is not sufficient, in order to overcome the omission, to say that the Partnership, acting by its liquidator, could easily have assigned such a claim or that there was no reason why the Partnership should assign some but not all of the claims that it might have against the administrators and RBS. The assignment must be construed according to its terms. As construed, it does not extend to the wider conspiracy claim.
75. Over and above the absence of the necessary assignment, the claim is in any event without any prospect of success, as I shall later explain. I shall begin, however, by considering the other claims against the administrators.

Claims against the administrators

(a) the business management claims

76. I start with what, at paragraph [30] above, I have referred to as "the business management claims". These claims, together with the wider conspiracy claim, face a quite separate preliminary objection. The objection stems from the consequences of the release from claims obtained by the administrators as part of the order made by Pumfrey J on 11 October 2001.
77. As I have explained, the release was subject to any claim notified to the administrators within the period stipulated by the order. The reference to any "claim notified" must be understood as being sufficiently specific to enable the administrators to have some idea of the nature of the claim. It is not sufficient, in my view, simply to say that "there are claims". Other than the complaints that the compromise with Burger King was in breach of duty and that the Partnership's assets had been disposed of at an undervalue, the letters relied upon by the claimants as notification to the administrators were wholly unspecific as to what the claims were. I am quite unable therefore to conclude that they gave the required notice of the business management claims and of the wider conspiracy claim.
78. It is true that any release of an administrator under section 20(1) of the Insolvency Act 1986 is expressed by section 20(3) to be subject to "the exercise, in relation to a person who has had his release as above, of the court's powers under section 212…". But the court's powers under that section, which are set out in section 212(3) and include the power to require the person in question to make restitution to the company or (having regard to the Insolvent Partnerships Order 1986) to the insolvent partnership, are, by section 212(5), "not exercisable except with the leave of the court" in the case where the application under section 213(3) is made by a contributory. The claims which the claimants bring in respect of loss or damage suffered by the Partnership are in the nature of claims by contributories. See section 79(1) of the Insolvency Act 1986 and article 3(4) of the Insolvent Partnerships Order 1994. The court has not given its leave for the exercise in relation to the administrators of any of its powers under section 212(3) (as applied to insolvent partnerships) to make restitution to the Partnership. On the information before the court, there is no material on which the court could properly do so. The particular instances of business mismanagement are no more than unparticularised assertions.
79. Through Mr Schofield, the fourth defendant, the administrators have endeavoured in paragraph 73 of his witness statement made on 24 May 2006 to answer the individual complaints of business mismanagement so far as they have been particularised. No additional material has been put in evidence by the claimants to controvert what Mr Schofield has stated in this regard. On any view, several of the complaints would seem to be misconceived, for example, the complaint that when operating the Partnership business, the administrators failed to make a "proper" profit. The administrators' trading account shows that a profit was made. There has been no evidence adduced to suggest that the trading account is wrong. But even if no profit, let alone a "proper" profit, had been made, it does not follow that there has been mismanagement by the administrators of the Partnership business. Likewise, the complaint that an excessive amount was spent on wages and salaries. The complaint does not explain to what extent what was expended was excessive; it merely states that 16% of turnover was spent on wages and 6.7% on salaries. Nor is it evident why it was mismanagement for the administrators to have reduced the level of "local store marketing".
80. In my judgment, on the material before the court, this head of complaint has no prospect of success even if, contrary to the view expressed above, the combined effect of Pumfrey J's order and the absence of any sufficient and timely notification of claims was not in any event fatal to this claim.
81. I should mention that Mr Hollander made another objection to these claims which in the event he was not concerned to pursue. This was that such notification as was given, confined at best to the compromise of the proceedings against Burger King and to the sale of the Partnership's assets at an undervalue, was not by or on behalf of the only person who, at the time the claims were notified, could have made the claims, namely the Partnership acting by its liquidator.

(b) the sale at an undervalue claim

82. That brings me to the two claims which were notified to the administrators in due time and were assigned to the claimants, namely (1) the sale at an undervalue claim and (2) the claims abandonment claim.
83. The sale at an undervalue claim, namely the complaint that the administrators acted in breach of duty in selling the Partnership's premises at an undervalue, which Mr Green described in argument as the "principal issue" in relation to the role of the administrators and the "lynchpin" of the case against them, suffers fatally from the lack of any real prospect of demonstrating that the price actually achieved on the sale, £3.612 million, was an undervalue.
84. The basis in the particulars of claim (at paragraphs 54 and 55) for suggesting that a significantly greater price could have been realised rests on a statement by the third defendant, Mr Oldham, in an affidavit dated 10 July 1997 (made in connection with the application to Evans-Lombe J for directions) that, on the basis of offers received by the claimants, he was given to understand that the Partnership premises should sell for £6 million or more. Although not pleaded, reliance is also placed by the claimants on Allied Leisure's apparent willingness in January 1997 (and before therefore the Partnership had gone into administration) to pay £7 million for the 18 trading premises then owned by the Partnership and the Company (the offer assumed a £11.09 million turnover to the end of March 1997 and a profit of £1.62 million for the same period and was subject to due diligence and Burger King's support and approval) and on the initial offers made by some of those who responded to the administrators' sales advertisements when, in September/October 1997, the Partnership's premises together with the Genesis premises were offered for sale. Reliance is also placed on (1) the decision to market the Partnership's premises alongside those of Genesis, the claimants contending that the latter were loss-making and unattractive to potential purchasers, (2) the adjustment by Allied Leisure of the eventual purchase price which it paid by allocating £600,000 more to the Genesis premises at the expense of the original allocation to the Partnership's premises (the details of which I have summarised at paragraphs [18] to [20] above) and (3) what the claimants allege to be the delay in beginning any marketing until September 1997.
85. The difficulty about this complaint is that no evidence has been adduced by the claimants to question the propriety of the £3.612 million actually achieved for the Partnership's premises on the sale to Allied Leisure. The claimants are bound to acknowledge, because they adduce no evidence to the contrary, that the sale was widely advertised. Likewise there can be no challenge to the fact that, at the end of the day, Allied Leisure was the only purchaser left from among the highest offers that were received. Nor can the claimants gainsay the fact that in May 1997, Weatheralls' view was that the open market value of the Partnership's premises lay between £3.1 million and £3.6 million with the result that the price actually achieved was in excess of the upper end of that valuation range. On analysis, the basis for the claimants' contention that the Partnership's premises were sold at an undervalue is no more than a belief that the premises were worth much more than the price achieved coupled with criticisms of the sales approach adopted and valuation advice relied on (in particular, the decision to sell the premises alongside those of Genesis, the acceptance of Allied Leisure's reallocation of the price between the Partnership and Genesis and the "preliminary" nature of Weatheralls' May 1997 valuation). But, as Mr Green readily acknowledged, this head of complaint would have had much more force if the claimants had obtained an independent valuation or had adduced other credible evidence (for example, contemporaneous sales of the same or very similar premises) to indicate that the price achieved was materially less than what, in the circumstances (in particular the deadline imposed by Burger King for achieving a sale), could and should have been achieved. Despite a promise in the particulars of claim (first appearing in paragraph 50 and repeated in paragraph 55) that "the matter will be subject to expert evidence" and criticisms by Davis J in the judgment he gave on 18 December 2006 when refusing Mr Jack Kyrris permission to challenge the decision of the Legal Services Commission to refuse legal aid that there was no expert evidence of any kind to indicate that there was any undervalue of the Partnership's assets at the time of their sale, the claimants have continued to take no steps to make good this deficiency. In the circumstances, to persist in the assertion, for it is on analysis no more than that, that the £3.612 million achieved was an undervalue is simply not good enough.
86. In short, on the material before the court, and making every allowance for the funding difficulties from which the claimants say that they have suffered, the administrators demonstrate that the claimants have no real prospect of establishing that the premises were sold at an undervalue. It follows that I shall strike out this claim as well.

(c) the claims abandonment claim

87. The other complaint - it is pleaded in paragraph 56 of the particulars of claim - is that in entering into the compromise with Burger King, the administrators were not acting in good faith, or fairly and with due regard to all the creditors of the Partnership, or in accordance with their duty to manage the business with reasonable care and skill. The complaint goes on to allege that the administrators failed to consult the claimants or their lawyers about the merits of those claims, failed to take any or any proper legal advice on those merits and failed to subject the merits of the claims to proper scrutiny.
88. The complaint in substance is that the administrators acted in breach of duty in entering into the Partnership compromise agreement, thereby abandoning the claims against Burger King. In my view, the complaint is hopeless. Before entering into that agreement, the administrators laid before a meeting of the Partnership's creditors, as they were obliged by section 23 of the 1986 Act as applied by the Insolvent Partnerships Order to do, their proposals for achieving the purpose of the administration. One of their proposals was to enter into a compromise of the Partnership's claims against Burger King. The reasons for doing so were explained in the administrators' report annexed to the administrators' proposals under section 23. They were discussed at the meeting of creditors (as the minutes of that meeting indicate) on 24 June 1997. In brief, the need to enter into such a compromise was driven by the administrators' view that if they were to sell the Partnership and obtain a better realisation for them than would be achievable on a winding-up, they had to come to terms with Burger King who were insisting on an abandonment of the Partnership's claims against them as a term of any co-operation over a sale. Among other matters discussed were the merits of the Partnership's claim under article 86. The minutes indicate that the solicitors acting for the administrators reported on their view that the article 86 claim would be "difficult" and "speculative" and would be expensive to mount. They also referred to their unsuccessful efforts to obtain co-operation from the claimants in regard to the Partnership's claims against Burger King. In the event, the meeting of creditors approved the administrators' proposals, including therefore the need to reach a compromise with Burger King. They did so by a very substantial majority. Over and above that, the administrators applied to and obtained the court's directions on the question whether the administrators were entitled as a matter of law to enter into such a compromise.
89. In the light of these facts, which in all material respects are undisputed, the claimants have no prospect of demonstrating that, in entering into the Partnership compromise agreement, the administrators were acting otherwise than in good faith or otherwise than with due regard to the views of the Partnership's creditors or without reasonable care and skill. It follows that this claim likewise must be struck out.

(d) the wider conspiracy claim

90. That brings me back to the wider conspiracy claim.
91. As I have explained (at paragraphs [35] to [38] above) Etherton J struck out the wider conspiracy claim as against Burger King (and the seventh defendant). His decision to do so was upheld by the Court of Appeal. The ground for doing so was that it had no prospect of success against the administrators as necessary parties to the conspiracy without whom, as conspirators, the claim had no prospect of success against Burger King and the seventh defendant. Given those matters it would be very odd if the claim were nevertheless to survive a strike out application by the administrators themselves.
92. The only additional ingredients to the claims since it was before Etherton J and the Court of Appeal are that the claimants can point to the reallocation by Allied Leisure of the price agreed for the Partnership and Genesis premises, disadvantageously to the Partnership to the extent of £600,000, and Allied Leisure's apportionment of the reduced overall price for the Partnership's premises so that the burden of the reduction fell on premises which were not subject to charges in favour of RBS (although two of the premises which did not carry any share of that burden were ones over which RBS held no charge). Mr Green sought to make much play of the circumstances in which that reallocation had occurred and also of the further matter, which so far as I can see was never in any way concealed, that the third defendant was not only one of the three joint administrators of the Partnership but also one of the two administrative receivers in respect of the Genesis premises and, as such, as Mr Green put it, in a position of conflict as a regards the proper allocation of the overall price Allied Leisure was paying for the two sets of premises.
93. Reliance was placed on a document prepared by a former employee of the Partnership, a Mr Hansen-Chambers, purporting to set out a series of exchanges between himself, Mr Jack Kyrris and a Mr Charles Sellers, an ex-employee of Burger King, at a meeting on 17 April 1998. The status of the document and the accuracy of its contents are very much in issue. My attention was drawn by Mr Green to exchanges in that document indicating an improper link-up involving Allied Leisure, Burger King, RBS, Mr Dixon (of Holroyd/Dixon) and the third defendant with a view to ensuring, among other matters, that the Genesis premises were sold alongside those of the Partnership to enable RBS to recover what it was owed by Genesis. The implication of the exchanges was that these various parties had conspired one with another to carve up the Partnership/Genesis restaurant portfolio between Allied Leisure and Burger King in such way as to ensure that RBS recovered what it was owed by Genesis at the expense of the Partnership. The problem about this document and its contents, which Mr Hollander described as hearsay based upon hearsay and little better than gossip, was the absence of any credible evidence to indicate that the Partnership's premises were in fact sold for less than they should have been or, conversely, that the Genesis premises were sold for more than they should have been. Nor was it explained why, given this improper link-up and the malign manipulation of events at RBS's bidding, to which the document was said to attest, RBS was, in the event and despite having charges over several of the Partnership's premises, only able to recover £100,000 out of the sale proceeds of the Partnership's premises and other assets towards the £2.5 million odd which the Partnership owed to it at the time of the making of the administration order.
94. As Mr Hollander pointed out, the circumstances in which the price for the two sets of premises came to be adjusted can only be viewed as in any sense sinister if Allied Leisure was in some way party to the conspiracy which the claimants allege, thus making the conspiracy one which embraced not just the three administrators (and not merely Mr Oldham), Burger King, the seventh defendant, RBS (as alleged in the particulars of claim) but Allied Leisure as well. Quite why all three administrators should wish to lend themselves to anything improper was not explained, let alone why Allied Leisure should wish to do so. At best Mr Green only felt able to submit that it was "not fanciful" that the court could "entertain a challenge" to the explanation for the allocation given by Allied Leisure in the letter dated 17 December 1997 from its managing director to Mr Oldham (referred to at paragraph [20] above) for altering the allocation.
95. I am of the view that these matters do not even arguably demonstrate that the claimants have any greater prospect of establishing at trial that the administrators entered into the Partnership compromise agreement as parties to a conspiracy, with the intention of doing economic damage to the claimants, than they were able to demonstrate when the matter was considered by Etherton J and the Court of Appeal in 2005. This means that, ignoring the absence of any assignment of it to the claimants and viewing the matter on its merits, the wider conspiracy claim is not one which has any prospect of success at trial as against the administrators.

Claims against RBS

(a) the wider conspiracy claim

96. A further consequence of the conclusion that the wider conspiracy claim has no prospect of success against the administrators is that, just as that claim could not succeed against Burger King and of the seventh defendant, it cannot succeed against RBS as another of the alleged conspirators.

(b) the wrongful advice claim

97. That brings me finally to the claim against RBS for breach of duty in advising the Partnership to stop making payment to Burger King and not to bring proceedings against them. The complaints, which are contained in paragraphs 35 to 39 of the particulars of claim, are to the following effect. In paragraph 35 it is alleged that RBS advised the Partnership to stop making payments due to Burger King "purportedly on the basis that (a) it would allow a substantial debt to build up (b) it would bring [Burger King] to the negotiating table and (c) it would force [Burger King] to talk seriously about how they were going to address the problems of BSE, the lack of support from [Burger King] and their profiteering activities…".
98. Paragraph 36 alleges that the Partnership was introduced to a Mr Penfold, RBS's specialised lending manager in Manchester, that Mr Jack Kyrris told Mr Penfold that he, Mr Kyrris, was about to issue a writ against Burger King seeking substantial damages but that Mr Penfold told Mr Kyrris and the first claimant that "if the Partnership did so, they the Sixth Defendant would withdraw their banking facilities". The paragraph then goes on to allege that Mr Penfold said that he knew how to deal with Burger King and advised Mr Kyrris and the first claimant that "the Bank's strategy would produce substantial help from Burger King", that they were in "safe hands" and that he had "the discretion to do whatever was necessary and was committed to helping the family".
99. Paragraph 37 alleges that it was or should have been obvious to Mr Penfold that "the Partnership was placing its confidence in him and that it was placing the Partnership's future in the Sixth Defendant's hands". It goes on to allege that, as a result, RBS owed the Partnership and its partners a fiduciary duty "to give independent and proper advice and to tell the Partnership to seek independent advice". It then alleges that RBS also owed a duty "to behave with the utmost good faith" and, in the alternative, that it owed the Partnership and its partners a duty of care in negligence.
100. Paragraph 38 of the particulars of claim pleads what I understand to be reliance by the Partnership upon the advice and other remarks attributed to RBS in paragraphs 35 and 36. It pleads:

"By July 1996 the Partnership had stopped paying [Burger King] in pursuance of the advice from the Sixth Defendant and had not commenced proceedings against [Burger King]."

101. There then follow allegations concerning what was alleged to be an agreement entered into on 13 November 1996. Those matters are no longer pursued. In paragraph 46, the claimants set out what they allege to be the breaches of duty, and damage suffered in consequence, founded upon the advice set out in paragraphs 35 and 36 (the pleading refers erroneously to paragraphs 36 and 37) as follows:

"Further, in giving the advice which it did set out in Paragraphs 36 and 37 above, the Sixth Defendant was in breach of its fiduciary duty and/or its common law duty of care. It should have advised the Partnership that if it followed its advice (i) the debt to [Burger King] would spiral, leaving the business of the firm vulnerable, and making the Partnership a bad lending risk (ii) that the banking relationship with Barclays [the Partnership's other bankers] would be destroyed and (iii) the Partnership's lending with the Sixth Defendant would be capped at a certain level or reducing and that the Sixth Defendant would be in a position shortly to call for those remaining properties which were not charged to them to be charged and (iv) the Partnership's financial position was such that it would go into administration and that if it did so the Partnership's financial ability to bring proceedings against [Burger King] in respect of the claims it then had against them would be ended. Had the Partnership been given that advice, the Partnership would not have agreed to act on the advice which it was given. As a result the Partnership suffered loss and damage. If the advice had not been given, the likelihood is that the Partnership would have continued trading and not gone into administration. It would in those circumstances have brought proceedings against [Burger King] in respect of the causes of action pleaded above…"

The pleading then goes on to allege loss and damage suffered by the Partnership in sums running to many millions of pounds.

102. Paragraph 46 is not well worded. I understand the plea to be that if RBS had acted correctly, and had not given the advice which it is said to have been given (ie to withhold payments to Burger King and not to commence proceedings against Burger King), the Partnership would have continued trading, would not have gone into administration, and would have been able to bring proceedings against Burger King in respect of the various matters (which in the event were later compromised) but that having been given and having acted on RBS's advice, it suffered the loss and damage alleged. In short, the claim seeks to pin responsibility on RBS for all of the Partnership's losses as a result of the two pieces of advice referred to in paragraphs 35 and 36 (the latter having been given by Mr Penfold), such advice having been given before or not later than July 1996.
103. It is to be noted that the claim is vague and unspecific in nature. The suggestion that RBS (or Mr Penfold in particular) advised either that the Partnership should withhold payments due to Burger King or should refrain from suing Burger King, is vigorously denied by the Bank. So also is the suggestion underlying the claims that RBS owed the Partnership any fiduciary or other duty over and above those which are the ordinary incidents of the relationship of banker and customer.
104. In support of its application to strike out these claims, RBS has filed detailed evidence, including a substantial volume of documentation comprising internal RBS file notes of meetings with representatives of the Partnership and others, internal RBS memoranda, incoming and outgoing correspondence, and other papers relating to the RBS/Partnership account. The broad position disclosed by the file is that the Partnership was already in financial difficulties well before Mr Penfold became involved in the handling of the Partnership's account with RBS which, the evidence shows, occurred on or about 3 June 1996. Indeed, it was precisely because the Partnership was experiencing financial difficulties that its account with the Bank was referred to Mr Penfold as RBS's Relationship Manger in its specialised lending services team based in Manchester.
105. The files and other papers do not contain the least suggestion that Mr Penfold or the Bank gave the advice which it is alleged was given. On the contrary, so far from advising that the Partnership should not pay Burger King what was due by way of rent and other payments, the file discloses that RBS was greatly concerned about what would happen if payments due to Burger King were not made. They disclose that, to this end, RBS was willing to contemplate meeting some of the Partnership's short-term cash requirements, over and above what RBS was obliged to do under existing arrangements, to help prevent the Partnership being in default with Burger King. Thus, in a lengthy internal file note made in June 1996, Mr Penfold noted:

"In the short term the Bank [ie RBS] has to address the immediate problem as in the event that the rent [due to Burger King by the Partnership] is not paid the business may well fall into BK's bad list with all the danger to the Bank's position that this would entail. Before we are able to address the long term funding shortfall which may entail a capital repayment holiday with Barclays or cancelling interest the short term problem will have to be solved.

… I believe that by meeting the short term requirements we will have a better chance of protecting the Bank's position in the medium term…"

A file note by Mr Penfold made in about August 1996 stated that RBS had "advised the management [of the Partnership] to go to BK [ie Burger King] and discuss the situation but they are burying their head in the sand and will only be reactive to any action that BK takes". The file note goes on to discuss attempts by Mr Penfold to agree with Barclays - the Partnership's other bankers to whom very substantial monies were also owed - to "put in place a survival package by a combination of interest and capital holiday … so that we may be in a position to agree some repayment schedule with BK without our exposure having to increase…"

106. The file also makes abundantly clear that, so far from the Partnership relying on RBS to negotiate with Burger King, the Partnership had its own advisers, including KPMG and, from October 1996 or so, various firms of solicitors, to advise it what to do. The file shows too that it was the Partnership and its agents that negotiated with Burger King and not RBS on its behalf. For example, there is Mr Penfold's file note of 20 September 1996 which records that "the customers [ie the Partnership] are to meet with BK next week to discuss the problems. They are hoping that BK will allow 3 years to repay the arrears as this has been done in the past." On 23 September 1996 Mr Penfold wrote to Mr Jack Kyrris to "emphasise how crucial it is to reach an acceptable deal with Burger King both in relation to the arrears and the level of royalties and other costs going forward so that the business has a realistic chance of trading both profitably and in a manner that generates a positive cash flow for the Banks".
107. It is also noteworthy that there is no hint of a complaint by the Partnership or its professional advisers concerning any advice which RBS is said to have given the Partnership, much less that RBS advised, and was wrong to have done so, in the mater now alleged. It is only in late 1997, long after efforts were taken to put the Partnership into administration in the Spring of 1997, that Mr Jack Kyrris began to complain about RBS's role.
108. This is not to say that the Partnership was not advised to withhold payments to Burger King. What is significant, however, is that the advice that it should not pay Burger King came not from RBS but, as is abundantly clear from a document disclosed by Mr Kyrris, from advice which the Partnership received from KPMG, its own independent adviser. On 18 July 1996, KPMG through one of its Norwich based partners, a Mr Burrows, wrote to Mr Jack Kyrris to "summarise what I believe the current position is and hint at some of the actions that need to be taken." The letter set out what Mr Burrows understood to be the "current position", including that the businesses (ie the Partnership and the Company) had "an immediate cash flow shortage" and that the "business forecasts show that this problem will continue until next spring". In a section headed "what Barclays have said" Mr Burrows reported that "they [ie Barclays] do not expect you to pay BKL [ie Burger King]". In a section headed "what actions should you take?" the following was included:

"You should not pay BKL. If other franchisees are having similar difficulties they won't be paying BKL and it is very important to negotiate new terms and to get better support for the brand and possibly even get loans from them."

The only reference to RBS was to state that

"It is not known if the Royal Bank of Scotland will postpone the loan repayments [due to them] and their attitude to your current plight is also unknown."

109. KPMG's advice was that "you should ensure that the Royal Bank of Scotland and Bank of Scotland [bankers to the Company] are kept fully in the picture."
110. Interestingly, the claimants have put in evidence what are said to be transcripts of telephone conversations between Mr Penfold and, for the most part, either Mr Jack Kyrris or a Mr Ainsworth Morris (of the Partnership) on various dates during the last ten or so days of November 1996. Assuming that the transcripts are correct - I have no idea whether they are, RBS makes no admissions concerning them and there are indications that they are incomplete - they give no support whatever to the claims concerning the advice to withhold payment to Burger King and to desist from issuing proceedings against Burger King alleged to have been given some months earlier. Although they suggest a closeness of relationship between RBS, acting via Mr Penfold, and the Partnership going beyond what I would have expected between banker and customer in the ordinary course of their dealings, Mr Penfold is quoted as advising the Partnership to seek its own separate advice. But it is important to understand that the claim is not concerned simply with whether there existed some form of relationship between RBS and the Partnership which went beyond the ordinary incidents of banker and customer, but whether that relationship was abused (or a duty thereby assumed broken) in the respects pleaded.
111. The clear conclusion that I have reached is that, on materials to which there is no credible factual challenge, the wrongful advice claim has no real prospect of success. RBS is therefore entitled to judgment under Part 24 to reflect that conclusion.
112. I should add, in any event, that I have difficulty in seeing what damage flowed from RBS's advice, assuming it was given, not to issue a writ against Burger King for substantial damages. Presumably, the Partnership ignored the advice which it alleges RBS gave it not to take proceedings against Burger King because it took that very course when on 25 April 1997 it began proceedings against Burger King alleging a variety of causes of action for which substantial damages were claimed. It was the compromise of those proceedings by the Partnership compromise agreement which forms the basis of the claimants' separate complaint constituted by the wider conspiracy claim. It can scarcely be suggested that the delay between giving the advice not to sue (assuming the advice was given and acted upon) sometime in June or thereabouts of 1996 and starting the action against Burger King in late April 1997 can have caused the claimants to have suffered damage which they otherwise would not have sustained. There is a similar question over the advice, assuming it was given, to withhold payments due to Burger King. The assumption is that, but for the advice, the payments due could and would have been made. That being so, it is not obvious why, once Burger King complained of non-payment and began proceedings in early November 1996, payment was not immediately made. By then, on any view, the Partnership was being advised by its own solicitors. Since payment was not made, the obvious inference is that it lacked, and had lacked all along, the means to make the payment. These matters, which go to reliance and causation, are simply not addressed by the claimants, whether in the pleadings or in their evidence.

Result

113. The applications of the administrators and RBS succeed and the claims against them must be dismissed. It follows that the claimants' cross-application for the trial of preliminary issues will also be dismissed.