England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

		Rolls Building Fetter Lane
		4 February 2015

1. JUDGE MACKIE: This is an application by the defendants for summary judgment alternatively to strike out the claimant's pleading and particulars. A claim form was issued in September 2013. It was a Part 8 claim. It became a Part 7 claim in March 2014, when Males J so directed, because this was a case that required evidence (perhaps in itself an indication that an application for summary judgment might not have a great deal of promise). This application was brought in September and came on for hearing the day before yesterday. I have three bundles of documents, witness statements for the claimant from Mr Khouj himself and for the defendants from Mr Vaghadia and Ms Lapwood. The application has been presented by Mr Richard Morgan QC, on behalf of the defendants, and resisted by Mr Dhillon QC and Mr Kuehne, on behalf of the claimant.
2. The claimant, a lawyer from Saudi Arabia, is the administrator of the estate of Mr Mansouri, who died intestate in June 2010, domiciled in Saudi Arabia. Mr Mansouri had been the Deputy Minister for Foreign Affairs for Saudi Arabia. The claimant's appointment is valid not just in Saudi Arabia but also within the United Kingdom.
3. The defendants are two English companies. The first defendant is an investment advisory company regulated by the FCA. The second defendant provides property management, accounting and administration services. It seems that the origin of the defendants lies in them, or associate companies, being the London Family Office of the Chartouni family.
4. The claimant says that the defendants acted as agents for the deceased and that it is entitled to inspect and copy all the defendants' documents concerning any business relating to Mr Mansouri. The defendants deny they acted as agent for Mr Mansouri and say they have no documents belonging to him or to which he is entitled.
5. The background against which this claim is set is said to concern Mr Mansouri's close friendship and business relationship with Mr Nabil Chartouni, a Lebanese businessman, and what are described as substantial gifts made by Mr Mansouri to his Saudi niece, Mrs Kurdi, to which it is said Mr Mansouri's heirs object. There are apparently proceedings in Saudi Arabia brought by the family, or by Mr Khouj, against both Mr Chartouni and Mrs Kurdi. It seems that several months after Mr Mansouri's death, Mrs Kurdi intimated that she had received gifts from Mr Mansouri and the claimant was provided with two letters, dated 13 April 2010, apparently from Mr Mansouri in effect expressing the desire that interests in assets, to which I shall refer shortly, should be transferred to Mrs Kurdi.
6. The claimant suggests that the defendants have a much closer connection with the Chartounis than they have admitted, pointing out that the defendants have declined to disclose who owns them beneficially. It seems that the claimant suspects that documents held by the defendants cast light on the alleged gifts made not long before Mr Mansouri died. That suspicion is intensified by the defendants' decision not to disclose the documents. It seems a pity that litigation should be necessary to achieve this purpose because one might have expected procedures to be available to enable third party documents, if they be third party documents, to be produced in England for the assistance of the court in Saudi Arabia, but we are where we are.
7. I turn now to the pleaded case which is the subject of the defendants' application. In the particulars of claim, the claimant alleges that between at least 1994 and 2010 the defendants, or each of them, undertook or managed investments on behalf of Mr Mansouri, including, but not limited to, three sets of assets. First there are Mr Mansouri's beneficial interests in the shares of a company called Tellico, which was the owner of a flat at 20 Avenfield House in Park Lane. Secondly there are shares purchased by Mr Mansouri in Acropolis Select Funds Limited, known in the litigation as "the funds". Thirdly there is a portfolio of private equity investments, including, apparently, investments in a number of private equity firms. The claim is that the defendants' activities on Mr Mansouri's behalf included making payments from a bank account in the name of Pensaloca SA, including in relation to the funding of capital calls and the payment of proceeds or distributions in connection with the private equity investments and in connection with expenses incurred with Tellico in the flat. It is said that between 2002 and 2010 the defendants acted on behalf Mr Mansouri in relation to matters or transactions of a personal or administrative nature, including obtaining car insurance, funding Tellico and paying expenses incurred in respect of the flat. It is said that the defendants were acting on instructions of Mr Mansouri as principal and on the instructions of Mr Chartouni, who was himself acting on behalf of Mr Mansouri as principal.
8. The claimant says that, in those circumstances, the defendants were agents of Mr Mansouri, by that relationship of agency owed fiduciary duties to him, including duties to account, to maintain proper records of transactions and, upon a request, to provide copies of such records. They say that, since Mr Mansouri's death, the duties have been owed to the claimant who is therefore, they say, entitled to inspect and take copies of the documents at the heart of the case.
9. The allegations in the particulars of claim are particularised by reference to the contemporaneous documents available to the estate, and correspondence received by the late Mr Mansouri from, largely, the defendants.
10. The defendants deny these claims. They rely on the absence of any written contract for the alleged relationship with Mr Mansouri and the fact that they maintain individual client files for their clients but do not have one for Mr Mansouri. They deny as a matter of law that any duties were owed by them to the claimant in relation to assets of Mr Mansouri, who was the ultimate beneficial owner. Any such duties, they say, are owed to the current legal owner of those assets. There are particular denials by the defendants, in relation to the three groups of assets to which I will turn shortly. The defendants say the claimant has no entitlement to inspect documents and, anyway, a principal does not have a general entitlement to take copies of agent's documents.
11. In an application of this kind, it is of course for the defendant to show that the claimant has no real prospect of success. I will deal initially with the application for summary judgment, as that requires more consideration of the facts than the strike out. There is no dispute about the legal basis upon which an application for summary judgment turns, there is citation of the familiar cases and the claimants rely in particular on the recent summary by Simon J in Arcadia. That summary lists eight considerations, including the following. The court must consider whether the claimants have a realistic as opposed to a fanciful prospect of success. The court must avoid conducting a mini trial without the benefit of disclosure and oral evidence. The court should avoid being drawn into an attempt to resolve conflicts of fact which are normally resolved in a trial process. The court must take into account not only evidence actually placed before it on the application but that which can reasonably be expected to be available at trial. Some disputes of law and about the construction of a document are suitable for summary determination but it may not be appropriate to decide difficult questions of law on an interlocutory basis where the facts may determine how those legal issues will present themselves. Notwithstanding 24.2(a), under CPR 24.2(b) there will be a compelling reason for trial where there are circumstances that ought to be investigated, such as a situation where there are grounds for scrutinising what appears on its face to be a legitimate transaction.
12. The defendants raised briefly at the hearing the question of what law governs the obligations which are the subject of the action. However, no issue has been taken about that on the pleadings and it is not necessary for me to consider that aspect.
13. Mr Morgan's application on behalf of the defendants starts with the law of agency. He submits that it is clear that, for an agency relationship to arise in English law, there must be an agreement, and he cites the speech of Lord Pearson in Garnac. Further, the rights and duties of the parties are dependent upon the terms of the agreement between them. At that point, he cites the advice of Lord Browne-Wilkinson in Kelly v Cooper. He says that an agent is a person who has actual or ostensible authority to affect his principal's legal relations with third parties and it is from this ability to create legal relations between principal and third parties that other fiduciary obligations flow. He cites extracts from Bowstead & Reynolds on Agency. He emphasises that any fiduciary duties must be accommodated to the terms of the actual agreement between the principal and his agent and he points out that there has been no particularisation of that agreement in this case.
14. Mr Dhillon QC emphasises that a person may have the same fiduciary relationship with the principal where he acts on behalf of that principal but has no authority to affect the principal's relations with third parties. Because of the fiduciary relationship, such a person may also be called an agent. He points out that the principal agency relationship will not necessarily be contractual and can exist without an enforceable contract or in circumstances where no contract is possible. He says that whether or not the parties considered themselves to be in a particular relationship is not determinative. What matters is whether they have, as a matter of fact, placed themselves in what the law recognises as an agency. He draws attention to passages in Bowstead and to the case of Fairstar, showing that it is the duty of an agent to preserve and be ready to produce constantly to his principal accounts of all his dealings and transactions.
15. The differences between the parties when approaching the law of agency are more apparent than real, as is evident when one looks even at something as fundamental as chapter 1 of Bowstead. At 1-001(1) is the passage from which Mr Morgan's principal submission starts:

"Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests are said so to act or so acts pursuant to the manifestation."

16. The claimant points to the words "so as to affect his relations" as being much broader than the initial approach adopted by the defendant. At Article 1(4), the work records:

"A person may have the same fiduciary relationship with a principal where he acts on behalf of that principal but has no authority to affect the principal's relations with third parties. Because of the fiduciary relationship, such a person may also be called an agent."

17. The position becomes clearer when one looks at the end of 1-002, where the author emphasises that the initial definition is intended to be read as a whole. No single sentence should be treated as encapsulating the whole notion of agency. The first of the propositions is no more than the first form, and he adds that the proposition in four adds for completeness another situation where the terms "agent" and "agency" may be not inappropriately used.
18. It is not necessary and not appropriate for me to seek to resolve questions of law concerning the alleged duty to disclose records and its alleged extent on this summary judgment application. The underlying facts are in dispute. As Mr Morgan himself said in his oral reply submissions, each agency relationship is or may be different. It seems to me pointless to seek to declare what the law is until the nature of the agency relationship, if any, has been properly identified. In broad prinicple and subject to the facts, the claimant has a reasonable case that such obligations exist.
19. So I turn to the evidence about the alleged agency relationship. The defendants say that two factors are an important backdrop to the evidence. They say that, while Mr Mansouri may have had an ultimate beneficial interest in certain assets, he was not the legal owner and, with respect to the shares in the fund, the first defendant was acting for that company, not Mr Mansouri. The defendants' evidence is that they were not Mr Mansouri's agent. There has never been any agreement that they should be his agent. They have never managed any property or investments on his behalf. They say that the defendants' documents belong to them or their clients and there are no documents to which the claimant is entitled.
20. I turn next to the three categories of asset.
21. First, the flat. The defendants say the flat was, as indeed it was, legally owned by Tellico. The shares in Tellico were owned by a company Borrowdale. Mr Mansouri was the ultimate beneficial owner of Tellico but he disposed of that interest prior to his death. Following the transfer of the beneficial interest, the shares in Tellico were transferred to Pensaloca. The defendants paid bills on behalf of Tellico and it is accepted that the directors of the defendants, amongst others, held a power of attorney on its behalf. But the defendants say that, at most, this makes the defendant agents for Tellico and that they are not answerable to Tellico. The defendants refer to the fact that the claimant's plead that the second defendant was appointed to manage Tellico in place of Kleinwort Benson. They say that, if any actions were taken by the second defendant in relation to Borrowdale's ownership of Tellico's shares, they were for and on behalf of Borrowdale, not Mr Mansouri. They point to Mr Vaghadia's uncontradicted evidence that the defendant did not act in relation to the management of Tellico.
22. In contrast the claimant refers to a letter dated 15 July 2009 in which Mr Mansouri informed Kleinwort Benson that he had "decided to transfer the management of Tellico investments and my apartment in London from yourselves to the defendants," and that Carol Lapwood would be in contact with Kleinwort Benson to organise the transfer of the company's records. They point out that, consistently with that intention, Ms Lapwood did contact Kleinwort Benson and assisted Mansouri in that regard, and to complete the due diligence required by Kleinwort Benson.
23. The claimant says that by April 2010 at the latest Ms Lapwood was arranging the payment of expenses incurred for the flat while pending the opening of a Tellico bank account. That was being done from a Pensaloca bank account and she requested Mr Mansouri to provide £20,000 on account of future expenses to be paid into that account. The records confirm that the transfer was made. They also point to the grant on 12 January 2010 of powers of attorney by Tellico to Mr Chartouni, his son, a director of one of the defendants, Mr Cameron Chartouni, Mr Vaghadia and Ms Lapwood. The claimant says the logical inference is that Tellico made that grant at Mr Mansouri's instruction.
24. Secondly the fund. The defendants say that there is no evidence to suggest that either of them ever created legal relations with the fund on behalf of Mr Mansouri. The defendants reject the claimant's suggestion that there is a relevance in the fact that the defendants corresponded with Mr Mansouri on several matters. The defendants say that the first defendant corresponded on behalf of Acropolis Capital Limited, a Guernsey company that was manager of the fund with whom the first defendant had contracted to provide services and that none of the correspondence shows the defendants themselves creating legal relations on behalf of Mr Mansouri. On each occasion Mr Mansouri contracted personally with the fund, as is evidenced by the requirement for his signature. They say there is no real prospect of the claimant showing that the defendants created legal relations between Mr Mansouri and the fund.
25. The claimant responds that the documents substantiate the fact of Mr Mansouri's investment in the fund and the fact that there was correspondence about it between Mr Mansouri and Ms Lapwood. They say that investment in the fund was one of the investments in relation to which the defendants were acting for Mr Mansouri. It points to an investment report of 30 June 2002 which lists the investment in the fund together with the private equity investments, which I will come to next. The claimant says that the obvious inference to be drawn from this document is that Mr Mansouri's investment was part of a much larger portfolio of investments in which the defendants were engaged as his agent. They also point to Ms Lapwood's request on 11 February 2003 that he send her a copy of his bank transfer instruction "just as you usually do, so I can track your payment." The claimant says that, as this was Mr Mansouri's first investment in the fund, it cannot have been in reference to dealings undertaken by the defendants solely as agents for someone else.
26. Thirdly, there are the private equity investments. The defendant rejects claims by the claimant based on documents sent to Mr Mansouri by Ms Lapwood at Mr Chartouni's request. They say the documents concerned payments made by Mr Mansouri to or received by him from Pensaloca, to which the second defendant provided, or provides, administrative services. They say there is no suggestion that the defendant created any legal relations between Mr Mansouri and any third party.
27. The claimant responds that the record shows dealings between Ms Lapwood and Mr Mansouri about investments in a number of funds, that Mr Mansouri was receiving mail from the private equity firms addressed to him care of one of the defendants, that Ms Lapwood made payments to Mr Mansouri's bank account representing distributions from the private equity funds and that she sought payments from him into a Pensaloca account in respect of capital calls. Ms Lapwood also maintained and provided to Mr Mansouri reports of the distributions he had received and of capital calls and which listed investments in the various funds.
28. I have referred to what the defendant says is the backdrop to the evidence. The claimants have concerns about that evidence. They point out that the administrator is not able to give any direct evidence of matters in dispute from his own knowledge at this stage, albeit, as Mr Morgan points out, he has access to Mr Mansouri's papers. The claimant says it only has correspondence which is available. It objects to passages in the witness statement of Mr Vaghadia, which, in effect, are Mr Vaghadia's understanding of what Mr Chartouni says. The claimant points to the very short and undetailed witness statements from the defendants and to the absence of any contemporary correspondence produced by them.
29. The defendants respond that correspondence has not been disclosed because it all relates to clients other than Mr Mansouri. That of course rather begs the question behind the action. They say that what might have been available for disclosure to Mr Mansouri in his capacity as a beneficial owner is no longer available because that beneficial ownership has changed. That may well be correct but it is a little puzzling that a company regulated by the FCA has nothing relating to its dealings with Mr Mansouri, even if it did not clarify him as a personal client.
30. The claimant also points to a letter of 9 November 2010 from Mr Vaghadia to Mr Khouj, the claimant, in reference to the claim by then being put forward. In the third paragraph of that letter Mr Vaghadia says this:

"As a result of the above mentioned, both Mr Chartouni and ourselves have a fiduciary responsibility only to Mrs Kurdi. Therefore we cannot discuss her financial affairs with you or Mr Mansouri's heirs as these assets are not part of Mr Mansouri's estate."

31. That leads the claimant to submit that a recognition of a fiduciary responsibility to Mrs Kurdi once she was beneficial owner must also involve the existence of a fiduciary responsibility to Mr Mansouri when he was in an equivalent position. The defendants point out that Mr Vaghadia is a layman, not a lawyer, and was using the expression loosely. That may well turn out to be the case but Mr Vaghadia is a chartered accountant and an approved person regulated by the FCA and his perception may prove to be significant.
32. Next, the claimant points to what it says are a number of inconsistencies. For the sake of brevity I do not identify all the alleged inconsistencies but they are set out in detail from paragraphs 21 to 51 of the claimant's counsel's skeleton argument. The claimant says that there have been four if not five versions of events put forward at various times for or on behalf of the defendants. Some of those alleged inconsistencies are mentioned in Mr Khouj's second witness statement. Mr Dhillon submits that the attempts by Mr Vaghadia and Ms Lapwood to reconcile those matters only make things worse.
33. Mr Dhillon also identifies what he says are issues of credibility revealed in a note made by Mr Nelson of his instructing solicitors of a telephone conversation with Mr Vaghadia on 18 February 2011. There has so far been no refutation of these further claims made by the claimants about inconsistency and lack of credibility. It may of course prove that there is little or nothing in those allegations but they require an answer.
34. I return to the defences themselves which it is contended that the claimant has no real prospect of successfully defeating. First there is the absence of a written retainer or file, and it seems to me that, on the material available, the defendants cannot show that the claimant has no real prospect of defeating that defence. The fact that the defendant did not generate a client file for Mr Mansouri does not mean that he was not a client. It may simply be a failure by the defendants to operate their procedures or a lack of appreciation that that would have been something which they should have done. In addition to the points which I have already made, there is very little evidence in the material of the practices adopted by the defendants and their reliability.
35. The other main defence is the defendants' position that all their dealings with Mr Mansouri were all on behalf of parties other than him. The answer, at present, is that it is anybody's guess what the position is until the question has been investigated.
36. The third aspect is the claim by the defendants that the claimant is not entitled to inspect or copy documents in the defendant's control. As I said earlier, that raises questions both of law, where there is a good arguable claim by the claimant that they may be entitled to those documents, but also facts because the answer will depend upon the nature of the agency, if any.
37. The Commercial Court is robust in granting summary judgment, particularly where the matter before the court is construction of a contract because of the waste of time and money caused by unnecessary trials. It seems to me that this case is very far removed from that for the reasons that I have given. This case turns on a dispute about facts to which will be applied a disputed view of the law. The defendants have not shown that the claimant has no real prospect of success in its claim.
38. As I mentioned earlier, Mr Dhillon relies in addition or alternatively on 24.2(b). He says that, even if there were the basis for a summary judgment in favour of the defendants, there are compelling reasons for this case to go to trial. He points out that Mr Mansouri is no longer with us and we do not have his account. He points to the surprising absence of contemporaneous documents from the defendants and to what he says are the inconsistencies in the accounts given by the defendants in their evidence. There is another aspect.
39. It is no doubt commendable that the defendants recognise, and seek to adhere to, the strict duties which they owe to their other clients. However, material suggests that there may be a closer relationship between the defendants and Mr Chartouni, who appears to be in dispute with the claimant estate, than the defendants accept. The skeleton argument submitted on behalf of the claimant was accompanied by a factual narrative setting out the facts as the claimant sees them to be. Paragraphs 16 to 18 of that document suggest that there may be something behind what the claimant says. Of course there may also be more than meets the eye behind the claim by the claimant.
40. The lack of completeness, clarity and perhaps candour in what has been provided by the defendants alone suggest to me that there must be a trial. It may well turn out that the defendants are entirely right to have adopted their cautious approach, but it is something that needs to be tried. If I was not already satisfied that this case had to go to trial under 24.2(a), the circumstances would compel a trial.
41. That is not the end of the matter, because there is an alternative application to strike out, in effect, the pleading. Mr Morgan points to 16PD 7.3 to 7.5 of the White Book and its requirement that, where a claim is based upon an agreement, certain particulars should be provided. As he points out, those particulars are necessary for the fair resolution of any issues arising in relation to the alleged agreement. He submits that the pleaded case of the claimant is stark and simply asserts that the defendants were agents of Mr Mansouri and agreed to act on his behalf in relation to various assets without giving particulars of the alleged agreement. Despite being requested to give those particulars, he complains that the claimant has not done so.
42. He says he is entitled to know between whom it is alleged any agreements were reached and the scope or terms of any alleged agreements, when and where the alleged agreements were concluded and other matters, and that, given the pleadings as if stands, it fails to comply with the fundamental requirements of the CPR and of the overriding objective and, therefore, should be struck out. He points out that he has already offered an opportunity for the claimants to put their house in order, which they have declined to take advantage of.
43. Mr Dhillon contends that the application is without merit. He says that paragraph 7 of the Practice Direction is directed to claims based on contract and not upon an agreement of the kind relied upon in this case. He points to the law of agency which shows that it is not necessary for the claimant to prove the creation and terms of a valid contract. He says it is perfectly clear that the defendants understand the case being made against them. He accepts that the pleading, as it stands, is thin but it will, he says, be developed and expanded as and when the contemporaneous documents is available following disclosure. He repeats that he is limited by the fact that he is acting for the administrator of someone who is no longer with us and the defendants, in his submission wrongly, have not provided any of the other contemporaneous material.
44. It is of course trite that, when an agreement is alleged, the court will order particulars of it and for generations details have been required of who the agreement was between, when it was made, where it was made, if it was in writing what the text was, and, if it was oral, what the gist was of the words used. However, those are obligations which apply to a contractual relationship. If one looks at the pleading as it stands, there is a series of circumstances set out between paragraphs 11 to 18. A period of time is given between 2002 and 5 June 2010 and the agency is said to arise in all those circumstances.
45. There is a need for particularity at some point but there seems to me no reason why that should not come at a later stage. Of course one is aware of the danger of fishing expeditions, cases brought for the purpose of seeing the other side's documents and disclosure in the hope that they will throw up a case which can then be properly pleaded. Of course a party has to get its case off the ground in the first place and the court is wary of proceedings being brought where that requirement is not met. As I see it that is not this case. The defendants are very well aware of the claims that are made against them. They are at no disadvantage in their current state of knowledge in continuing to defend the case. It will be appropriate for the claimant to amend its pleading but it does not seem to me that there is a need for running repairs, step by step, as one goes along. A sensible stage to amend the pleading will be following disclosure in the case.
46. It follows that, for these reasons, I refuse both of the applications brought by the defendants.