England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/01/2014

Mr Justice Green :

INDEX TO JUDGMENT

A. INTRODUCTION	Paragraph(s)
(1) The issue in outline	1-6
(2) A short overview of the facts	7-32
(3) The allegations made against the Defendants	33-34
(4) The ultimate fate of the Site	35
B. OBSERVATIONS ON WITNESSES
(1) Observations on the witnesses	37-47
(2) Observations on limitations in the expert evidence	48-49
C. THE FACTS
(1) Introduction	50
(2) The original sale of the Site from the Commission for New Towns to the Company: The overage or "clawback" provisions	51-55
(3) The original planning permission for the Site	56-57
(4) The financial position of the Company in the wake of the foot and mouth crisis leading up to the decision to sell the Site	58-66
(5) The Prologis Agreement: 2003-2005	67-70
(6) The conduct of the minority shareholders and the farming
interests	71-76
a)The tactics deployed by the farmers' contingent
b)The spoiler
c)The minority shareholders' attempt to wind the Company up
d)The pestering telephone calls
(7) The position of English Partnerships (EP)	77-94
(8) The position of the planning authorities to change of use	95-102
(9) The Wollaston Motors Ltd application for temporary change of use	103-105
(10) The Letter of Instruction from the Company to MCL of 18th October 2004	106-109
(11) The Letter of Advice from MCL of 20th October 2004	110-111
(12) The particulars of sale	112
(13) The fee arrangement	113
(14) Evidence relating to valuation of the Site 1996-2006	114-123
(15) The sale from the Company to Earlplace: 2005	124-127
(16) The sale of the Site by Earlplace to Kilmartin: 2005	128-129
D. NEGLIGENCE BY THE FIRST AND SECOND DEFENDANTS
(1) Capacity in which Defendants are sued	130
(2) Relevant legal principles	131-138
a) The scope of the duty
b) Relevance of contract
c) Being wise in hindsight
(3) Position of the First Defendant (Mr Cowling)	139-157
a) The allegation Mr Cowling failed to obtain authority from the Board
b) The alleged irrationality in not forcing Prologis to pursue its agreement with the Company
c) The alleged irrationality in failing to obtain advice in relation to the sale of the Site
d) The alleged irrationality in failing to do a deal with EP to neutralise clawback
e) The alleged irrationality in marketing the Site on an unconditional basis only
f) The position of minority shareholders and the farming community
g) The alleged irrationality in failing to resist Bank pressure or negotiate further concessions from the Bank
h) The alleged irrationality of selling the Site to Earlplace for £2.25m
i) Conclusion
(4) Alternative analysis of the position of the First Defendant: Power of court to grant relief under Section 1157 Companies Act 1986	158-169
(5) Position of the Second Defendant (Mr Lawrence)	170-176
E. BREACH OF FIDUCIARY DUTY BY FIRST AND SECOND DEFENDANTS
(1) Introduction	177
(2) Relevant legal principles	178-199
a) Basic principles
b) The relevance of contract
c) The duty to account
d) Exceptions to the duty to account: where acting for multiple principals is inherent to the business
e) Exceptions to the duty to account: informed consent and disclosure
f) Failure to provide any disclosure at all
g) Provision of partial disclosure
h) Interest
i) Confidential information
(3) Position of Second Defendant (Mr Lawrence)	200-267
a) The date upon which Mr Lawrence ceased to owe a duty to the Company
b) The date upon which Mr Lawrence was first retained by Earlplace and the terms of his retainer
c) Whether Mr Lawrence was in a position of conflict as between the duties he owed to the Company and his own personal interest
(i) The communication of information by Mr Lawrence to Earlplace
(ii) The conflict arising out of the negotiation of the retainer on 31st August 2005
d) Whether there was adequate disclosure
e) Conclusion in relation to the Second Defendant
(4) Position of First Defendant: Section 10 Partnership Act 1890	268-278
a) The Statutory framework
b) The House of Lords in Dubai Aluminium
c) Summary of relevant questions to ask
d) Conclusion in relation to the First Defendant
F. CONCLUSION	279

A. INTRODUCTION

(1) The issue in outline

1. This case concerns the fiduciary and tortious duties of agents in relation to the sale of commercial property. In particular it concerns the duties of agents who act, or seek to act, for both the vendor and purchaser of commercial property in the same transaction and of company directors who instruct a firm in which they are a partner, to act for their company.
2. With regard to the scope and extent of an agent's fiduciary duty to its principal, the facts of this case concern the situation, commonplace in relation to transactions relating to commercial property, whereby an agent (A) is instructed for the vendor (V) to market a site and where A, often using his own contact book, finds a purchaser (P) but at the same time accepts instructions from P in relation to the sale of the same land.
3. As the facts of this case demonstrate, various permutations of this scenario can arise. For instance, A might in the early stages agree to act on an unremunerated basis for V in the hope, expectation or even promise that at a later stage V might formally instruct A on the actual sale for a commission. In the present case the agents in question worked for the vendor for some years on an unremunerated basis and only in the latter stages of the marketing and sale process were they formally instructed on remunerated terms. Further, A might, when seeking out putative purchasers on behalf of V, start working for them more or less immediately on a speculative and unpaid basis in the hope that if V does in fact sell the land to the putative P they will be instructed by P on the subsequent disposal of the land. In this case, the agents giving evidence described acting on an unremunerated basis as a "speculative" instruction. Undoubtedly there are many other permutations but they all raise the question of the duties of agents who in a variety of different ways seek to act for more than one side in a transaction.
4. I have said that these arrangements are commonplace and evidence before me suggests that this is indeed the case. Many commercial property transactions involve local agents and developers and they will tend to know each other. An agent will frequently have a contact book that he can exploit for the benefit of a vendor. Many of the contacts in that book who might become purchasers might also be former clients of the agent. In one sense it is therefore in the interest of the vendor to use an agent who has strong local connections and who can, through using his local contacts and goodwill, identify potential purchasers and introduce them to the property in question. And of course once the sale is over there may very well be ongoing work for a good and competent agent now acting for a new client, viz., the purchaser.
5. But this conceals a problem which is that an agent who has an interest in the transaction from both sides of the negotiating table has a clear conflict of interest. The vendor wants to sell for the highest price; the purchaser wants to buy for the lowest price. The incentives operating upon the agent can depend upon the nature and structure of the fee arrangement. A fee structure can operate to create a powerful incentive on an agent to favour V or P and he might fashion his advice accordingly. From V's point of view if A is also advising P then A might not loyally be seeking the highest price possible. He might also be using information of a commercial or confidential nature which belongs to V and which A has acquired only by virtue of acting for V, but which could be of real value if communicated to P. This value could lie in P negotiating a lower price in the sale from V and/or at a later stage when P wishes to sell the property on, or develop it, or otherwise exploit it for commercial gain. It is important also to recognise that the point in time at which a conflict might arise can be well before A actually negotiates a fee arrangement with P. If A seeks, speculatively, to procure P as a client then A might well promote himself upon the basis of the "inside track" knowledge that he has of V. That information might be valuable to P in deciding upon the optimal level of offer to make to secure the purchase; but the information might be proprietary to V and be in the possession A only because of his retainer from V. For instance it might relate to problems that V is facing in negotiations with individual officials in the planning authority or financial pressure imposed on V by its bank or creditors, which make it anxious to sell and prepared to accept a low offer. If A is actively soliciting instructions from P then he risks putting himself in a position of conflict because his personal interest runs in the opposite direction to his duty of loyalty to his principal (his existing client).
6. The solution to the conflicts which arise is full disclosure by A so that all parties become fully aware of the position that their agent is in. Disclosure might enable V to impose limitations or conditions upon A's dealings with P. If the principals accept the position then the agent is secure from an allegation of breach of fiduciary duty. Because of the advantages that can accrue from an agent who uses his skill and contacts to bring sellers and buyers together, the respective principals might well be content to approve the agent's dual role possibly subject to conditions. Generally, it will be the consent of the first principal (usually V) that is critical because the second principal (P) will almost invariably be fully aware that A is instructed for the vendor and indeed that might be the very reason that makes A attractive to P in the first place. But the key is disclosure - "sunlight bleaches".

(2) A short overview of the facts

7. Before examining the case in detail I start by setting out a summary of the facts.
8. Northampton has been a market town since the grant of a Royal Charter by King John in 1190. Up until the middle of the 19^th century a livestock market was held in Market Square, in the city centre. Due to the difficulties experienced in moving livestock to the town centre a new cattle market was built in Victoria Promenade which opened in 1873. In the 1990s redevelopment plans formulated by Northampton Borough Council ("NBC") threatened the continuation of the market in the town centre. At that point the market was run by Northampton Livestock Sales Limited ("NLS").
9. NLS accordingly resolved to move the market out of the city centre. It sought to acquire a 12.7 acre site at Lilliput Road, Brackmills, Northampton ("the Site"). Prior to 1996 the Site was owned by the Commission for New Towns ("CNT"). This was later renamed English Partnerships ("EP"). Unless the context demands otherwise I shall use the expression EP throughout this Judgment to denote both the vendor of the Site to the Company, and, the owner of certain parcels of land adjacent to the Site to its north and south which I identify below.
10. EP sold the land to a new company formed specifically for the purpose called Northamptonshire Auctions Plc ("NA Plc" or "the Company"). The Company began to operate the site essentially as a cattle market, lorry park, and café. In 2001 disaster struck in the form of the foot and mouth crisis. This decimated the livestock auction business of the Company and although it briefly came back to life in 2002, it never recovered. The livestock auction closed permanently in October 2002 and shortly thereafter a decision was taken by the Company to sell the Site. From 2002 onwards the Company explored the possibility of obtaining planning permission for a change of use to B1, B2 and B8 usage, i.e. a wider commercial usage.
11. At that stage it had planning permission for use, in substance, only as an auction centre and there was powerful and durable opposition from the local farming community, some of whom were minority shareholders in the Company, to any sale of the Site on the basis of redevelopment which risked a change of use away from that of a cattle auction and market. This farming community was not only vocal but was also well organised and pursued a vigorous campaign, deploying all sorts of stratagems and devices, to prevent the local planning authority from agreeing to any change of use. They were in this regard effective. The planning authority more or less set its face against any redevelopment of the Site away from that of an auction facility and, more specifically, a cattle auction facility. This meant that if the full development value of the Site was to be unlocked it had to be made part of a much wider, comprehensive, development which involved not only the cattle market site but the two adjacent sites, both of which happened to be owned by EP. These adjacent sites were known as D1, which was land to the north of the Site; and a green space site to the south. I shall refer to these adjacent sites in this Judgment as the "D1" site and the "Green Space" site.
12. When the time came for the Company to sell the Site there were two basic sale options open to it which I refer to as (a) the unconditional sale and (b) the conditional sale. The unconditional basis was to sell the site on the basis of its existing permitted planning use leaving it to the purchaser to assume the task of exploiting the Site commercially on the basis of existing permitted use or alternatively seeking planning change of use either for the Site in isolation or as part of a wider and more comprehensive redevelopment. The conditional sale would be to sell the Site upon a basis which involved, either wholly or in part, an element of payment which was conditioned upon redevelopment, which necessarily involved a permitted planning change of use.
13. It is – not surprisingly - common ground that there is a material difference in value of land with and without planning permission for a change of use. If land is sold on the basis of its existing use then a purchaser will pay for the land on the basis of that permitted use but will, or might also pay an increment to reflect the planning potential of the land. This increment is called the "hope" value. In such a sale the consideration paid to the vendor is not made contingent upon a change in planning use. In contrast, in a conditional deal, all or some of the consideration may be contingent upon permission to change usage. The value of the "hope" element in an unconditional sale and the value of the contingent element in a conditional sale depend upon the likelihood of the planning authorities granting change of use as well as a range of commercial considerations, such as the availability of finance for redevelopment, the existence of partners to share risk, etc.
14. In the present case, the Site, when marketed, did not have permission for a change of use. Accordingly, if the sale was to have been on a conditional basis this would have involved the Company assuming risk, i.e. that planning consent would both be obtained, and in a reasonable period of time, that an agreement could be reached under which the purchaser still paid a significant up front component of the total consideration payable.
15. From 2002 onwards, the financial position of the Company became ever more stretched. Its indebtedness to its bank mounted substantially yet its income stream declined dramatically. Its only material asset was the Site and this had to be sold in order to repay the bank and provide at least some return to shareholders.
16. When the Company initially sought offers for the Site it did not limit the offers it sought. They could be conditional or unconditional. It left it to the market to decide. The Site did stimulate considerable interest which included conditional offers but sadly none came to fruition. This was particularly the case with a development company called Prologis.
17. In October 2004 the Company resolved to market the site through an agency. It selected MCL. MCL had two partners, Mr Cowling (the First Defendant) and Mr Lawrence (the Second Defendant). Mr Cowling was not only a partner in MCL he was also the Chairman and largest shareholder (as to 41%) in the Company. Mr Lawrence had no interest in the Company. MCL had been generally acting for the Company prior to this point in time in relation to the sale of the Site.
18. On 18^th October 2004 MCL was formally, in a Letter of Instruction, instructed to market the Site upon the basis (i) of its existing use as an auction centre and lorry park and (ii) that the Company would not be interested in obtaining conditional offers. In the particulars of sale however, it was stated only that conditional bids would be unlikely to be accepted. It did not preclude them. Prices in excess of £3.5m were sought for freehold offers. In the event of a sale MCL would be paid a commission of 1.25% of the sale price.
19. In early 2005 various bids of both a conditional and unconditional nature had been made and the Board of the Company considered them all. However, even though some were promising, they all fell by the wayside.
20. During this period the Company made a variety of efforts to obtain planning permission for a change of use on the Site. Had the Company been successful then, for the reasons set out above, the value of the Site could have been substantially in excess of that which it had if limited to its existing use as a cattle market. There were however many obstacles to the obtaining of consent, which I address in greater detail below.
21. Early in 2005 Mr Lawrence had indicated to Mr Cowling a desire to leave the MCL partnership and work for himself. Mr Lawrence and Mr Cowling took advice and upon the basis of the advice decided to sell the partnership as a going concern. Ultimately, in September 2005 the business of the partnership was sold to Carter Jonas, the well known nationwide agents and surveyors. The basics of the deal were agreed by late June. Mr Lawrence says that as from 4^th July 2005 he had left the partnership and was a free agent. He treats that date as bringing to an end his agency for the Company and hence he says that thereafter nothing he did could amount to a breach of his fiduciary duty to the Company, or negligence.
22. Events which occurred following the 4^th July 2005 make the proposition that he ceased to owe any duty to the Company as from that date untenable. I do not set them out in this summary but address them fully below (See Section E(3) below). Thereafter, and even though he still from time to time acted for the Company or purported to act for the Company in relation to the sale of the Site, and even though he still expected to be paid by the Company on any sale of the Site (Mr Cowling and Mr Lawrence would share equally the 1.25% commission), and even though he acknowledged that he was still a partner for the purposes of effecting the sale of the business to Carter Jonas, he set about seeking to find new clients for whom he could act in the purchase of the Site from the Company.
23. During the course of the trial Mr Lawrence recognised that he should have taken legal advice over how he conducted himself during this period, but he did not.
24. In late July 2005 Mr Lawrence, through a chance social meeting, came into contact with Mr Lawrence Grove of a company called Earlplace Limited ("Earlplace") which was interested in the Site. Matters progressed quickly to the point whereby at the end of August Mr Lawrence felt able to say to Mr Cowling that he was 99% certain that Earlplace would make an offer. Very shortly after that, Earlplace agreed with Mr Lawrence over a handshake and in an arrangement that was never reduced to writing and which Mr Lawrence described as "liquid", that he should act for Earlplace in relation to the Site. The deal was that he would be paid a third of any uplift in value between the price Earlplace paid to the Company for the Site and the value that Earlplace later realised on subsequent sale or disposal of the Site to a third party. No money accordingly passed hands at this stage, but, if Earlplace purchased the Site and then sold it on for a higher sum, Mr Lawrence stood to be handsomely rewarded.
25. Mr Lawrence did not inform Mr Cowling or the Company of this potentially very lucrative new agreement, though they knew generally that he was acting for Earlplace. Within days of shaking hands with Mr Grove, Mr Lawrence attended a meeting (on 1^st September 2005) at which the Company and Earlplace sat down and agreed the sale. At the end of that meeting, and assuming it proceeded to exchange, Mr Lawrence therefore stood (a) to be paid by the Company for the sale and also (b) to be paid by Earlplace a third of the uplift in value on any subsequent sale. Common sense tells one that in acting for the vendor and purchaser without his first client (the Vendor) knowing of the terms of his handshake deal with Earlplace, an acute conflict arose. He was due to be paid by the Company on the sale to Earlplace at a rate which worked out at 50% of 1.25% of the sale price. But if he could persuade his new client – Earlplace – to pay as low a price as they could get way with to the Company, then the prospect of a huge pay off beckoned on a resale if the uplift was significant, which, in the event, it turned out to be.
26. On 23^rd September 2005 the Company exchanged contracts for the sale of the Site to Earlplace for a consideration of £2.25m.
27. Fortune beckoned – some months later, between exchange and completion, Earlplace managed to negotiate a deal to sell the Site on to a company called Kilmartin Ltd ("Kilmartin"). Earlplace so arranged matters that they were able to complete on the purchase of the Site from the Company for £2.25m on the same day as they sold the Site (or "flipped" it, to use the vernacular) to Kilmartin for £5m. This occurred on 3^rd April 2006.
28. Earlplace thus earned an immediate profit of £2.75m and in consequence Mr Lawrence obtained a fee of £744,035.02 being about one third of the uplift between £2.25 and £5m. Mr Lawrence has throughout these proceedings been reluctant to disclose the nature and level of his fee. It was only upon being ordered to do so by the Court on 9^th October 2012, that the extent of the payment was made known. Mr Cowling says, and I accept this, that he only learned of this figure when it was disclosed pursuant to that Court order. One part of this case concerns whether Mr Lawrence is guilty of a breach of his fiduciary duty owed to the Company and whether in consequence Mr Cowling is jointly and severally liable alongside him pursuant to Section 10 Partnership Act 1890.
29. The other part of the case concerns the allegations by the Claimant that Mr Cowling and Mr Lawrence acted in breach of their tortious duties, essentially negligently, in selling the Site for, in effect, an undervalue. The Claimant asserts that it is manifest that the true value of the Site was substantially in excess of £2.25m. It alleges that the Defendants were in breach of duty in marketing the Site without taking account of the potential of conditional offers. In this regard Mr Lawrence is sued qua partner in MCL and Mr Cowling is sued in his capacity qua partner in MCL but also qua director of the Company.
30. Following the sale of the Site by the Company it was able to repay the Bank. Thereafter, the Company was placed into liquidation with a view to a distribution of the surplus being made to shareholders. At a creditors' meeting on 25^th July 2006, a suggestion was made that connected parties had benefitted from having advised Earlplace on the sale of the Site to Kilmartin. Mr Cowling indicated a lack of knowledge of any such state of affairs.
31. The liquidation was subsequently delayed by pressure from minority shareholders that the liquidators investigate the sale to Earlplace and the onward sale to Kilmartin. The liquidators took up the challenge. They, inter alia, obtained a retrospective expert valuation of the Site which however came in at a lowly £1.5m for both September 2005 and April 2006. The liquidators also contacted the directors of Earlplace about the fee arrangements in place with Mr Lawrence.
32. Ultimately the liquidators were pressurised to transfer any rights of action the Company might have. They sought offers and sold the causes of action for a nominal sum. The Claimant is the assignee of these rights from the Company and brings the action on behalf of all shareholders. The driving force behind the claims is the farming interests who have objected strenuously to the loss of a cattle auction facility in Northampton. The terms of the assignment include that the Claimant holds any monies recovered in trust for the shareholders of the Company (which would include Mr Cowling). At the time, as the evidence I set out below demonstrates, the farming interests mounted a vigorous campaign employing tactics that would not have been out of place gracing one of the racier scripts from the "Archers" in order to prevent the sale of the Site on an unconditional basis. Now some of those same interests assert that it was negligent not to do so.

(3) The allegations made against the Defendants

33. In their amended Particulars of Claim the Claimant alleged (in summary) the following against the First Defendant (Mr Cowling):

Negligence: Mr Cowling was sued in negligence qua director of the Company and qua agent in MCL arising out of the manner in which he marketed the Site. The basic elements of the allegation may be summarised as following: (i) that he marketed the Site only on the basis of its existing use and irrationally treated the Site as having no significant development value and thereby lost the chance to obtain a mixture of an upfront fixed sum and a conditional sum based upon the subsequent success of the redevelopment; (ii) that he wrongly failed to obtain necessary planning and valuation advice necessary for a properly planned and targeted marketing strategy; (iii) that in marketing the Site on a limited basis he ignored an important potential pool of purchasers and thereby reduced the opportunity for creating competition for the Site and accordingly compromised the potential return; (iv) that he failed to exploit an existing contractual opportunity which was available to the Company (the Prologis agreement); (v) that he failed generally to market the Site properly and in particular to specific developers such as EP and Kilmartin. The Claimant contended in its opening submissions: "These are fundamental failures exposing a deep vein of irrationality in the marketing exercise. They are not minor criticisms which can fairly be said to be matters of professional judgment".

Breach of fiduciary duty. The essential allegations were threefold. The first is, in pith and substance, a reformulation of the claim in negligence: by virtue of Mr Cowling's formulation of a highly compromised marketing strategy and the imposition of limits upon the marketing of the Site, there was likely to be a diversion of the benefit of the development opportunity away from the Company to prospective purchasers. The second component to the allegation was that Mr Cowling allowed Mr Lawrence to pursue a flawed strategy and thereby surrendered the development value of the Site. The third allegation was that Mr Cowling failed to obtain the authority of the board and/or the Company before entering into the exclusive negotiating agreement with Earlplace and/or selling the Site. It is submitted that he thereby exceeded his authority and was guilty of further breach of duty.

Liability on the part of Mr Cowling for the conduct of Mr Lawrence. The Claimant alleges further that Mr Cowling failed properly to supervise Mr Lawrence, failed to ensure that he complied with his duties, failed to report his breaches to the Board of the Company, failed himself to report to the Company those matters which Mr Lawrence failed to report to him, failed to disclose to the Company the nature and extent of the fee earned by Mr Lawrence for his work for Earlplace, and, failed to appoint independent and properly qualified advisers.

Fraud. In paragraphs 57A-57D of the Amended Particulars of Claim dated 22 November 2012 the Claimant alleged that Mr Cowling made fraudulent representations to the Company; that Earlplace was not prepared to pay more than the £2.25m; that Earlplace had represented this to be the case to Mr Cowling; and, that Mr Cowling believed this to be the case. It is alleged that in fact Earlplace was prepared to pay overage at the rate of 30% in addition to the fixed price of £2.25m. The nub of the fraud claim is based upon a belief that the retainer, negotiated by Mr Lawrence, was in fact a reflection of extra value that Earlplace was prepared to pay for the Site but which was, in effect, diverted to Mr Lawrence.

Contract: The various allegations set out above are also cast in terms of breach of contract.

34. In their amended Particulars of Claim the Claimant alleged the following against the Second Defendant (Mr Lawrence):-

Negligence: The Claimant alleges that Mr Lawrence was negligent qua agent in MCL in the performance of his duties under the Letter of Instruction. They rely upon many of the same facts as are relied upon as against Mr Cowling. They also allege failure attributable only to him in relation to his failure to give proper advice to the Company.

Breach of fiduciary duty: The Claimant alleges breach of fiduciary duty in his capacity as agent in that: (i) he cultivated a development opportunity in respect of the Site for his own benefit and latterly for the benefit of Earlplace; (ii) he misused information about that development opportunity which he obtained when he and MCL were acting or purporting to act for the Company; (iii) he failed to disclose to the Company information that it was relevant for the Company to know, including but not limited to, advice and information that he provided to Earlplace prior to the sale and, further, a complete up to date assessment of the development opportunity based upon his discussions with EP and the planning authorities; he promoted the sale of the Site to Earlplace for £2.25m and the accompanying release of the Prologis agreement when it was obviously not in the best interest of the Company.

Fraud: The Claimant alleges fraud against Mr Lawrence in the same terms as were made against Mr Cowling.

Contract: The allegations set out above are also cast in terms of breach of contract.

35. The Claimant abandoned its allegation of fraud shortly before the trial. Further, all claims for breach of fiduciary duty were abandoned against Mr Cowling. It was also confirmed that the only allegations in fact pursued were those reflected in the closing submissions. It was also accepted that the contract claims did not add anything to the other claims. In relation to contract serious issues arose as to whether the claims were time barred. Given that the contract claims were not pursued during the trial it has not been necessary for me to rule on any limitation issues arising. The claim as finally advanced was limited to (a) negligence against both Defendants and (b) breach of fiduciary against the Second Defendant for which the First Defendant was liable vicariously.

(4) The ultimate fate of the Site

36. Finally, Kilmartin never developed the Site. They went into liquidation in 2010. The Site reverted to Lloyds Bank (as lenders to Kilmartin). It was sold on, as part of a package, for a figure believed to be in the region of £500,000 and then was resold to Roxhill Developments for £1.75m. Planning permission was obtained for a change of use for a large distribution unit in November 2011. There is now no cattle auction on the Site.

B. OBSERVATIONS ON WITNESSES

(1) Observations on the witnesses

37. I make the following preliminary observations about the evidence of the witnesses of fact and experts that I have heard in this case. I deal with each witness in the order in which he or she gave evidence.
38. Mr Robinson (for the Claimant): He gave his evidence frankly and in a forthright manner. He agreed with many of the propositions put to him by Mr Walker (Counsel for Mr Cowling) based upon the documents that he was shown. In relation to specific events he readily accepted that his recollection was at times "very sketchy". He said that he was a farmer and not a property expert. It was clear to me from his evidence that he was content to rely upon the skills in this regard of Mr Cowling. He said in oral evidence that he resigned his position on the Board of the Company on 23^rd August 2005 because he objected to the sale to Earlplace on an unconditional basis. However, his letter of resignation explained that it was because the Company was no longer engaged in agricultural activity that he felt that his value to the Board had lessened and that he should hence resign.
39. Ms Corrine Lewington (for the Claimant): Ms Lewington was responsible for many years for all of the book and financial record keeping and accounting within the Company. She was a director and company secretary. She took the minutes of board and other meetings. She explained that "she was no property expert". According to Ms Lewington, she left the employ of the Company on 30th September 2004 a conclusion she derives from examining her P45. She says that after she left in September 2004 she was asked to remain as director and company secretary but that she does not recall being paid anything or ever having attended meetings. The issue has significance because she was one of the few remaining directors of the Company in 2005 and questions arose as to whether she authorised various matters. In assessing her evidence I take account of the following points. First, her written and oral evidence was essentially an attempt to piece together from documents events occurring nearly 10 years earlier and I formed the view that her actual recollection of events was poor. Secondly, there are entries in the Company accounts recording her as having been paid a monthly sum after September 2004 until mid-2005 which contradicts her suggestion that she had no involvement with the Company in 2005. Thirdly, she is formally recorded as having attended a Board meeting as company secretary in February 2005 which post dates the point when she says she ceased to be involved with the company. Fourthly, there are also documents suggesting that she started a new employ in February 2006 which is at least not inconsistent with her having some involvement with the company in 2005. Fifthly, her Witness Statement contains an emotional outburst to the effect that she is "quite angry" about what she has since been told by an un-named third party to the effect that Mr Cowling and Mr Lawrence had made gains at the expense of shareholders. She says that as a shareholder she has been "cheated out of a share of the extra money which could have been realised from the sale of the site". She says she is angry with herself for being "naïve". She says of the retainer that Mr Lawrence received from Earlplace that she would be "amazed" if "Mr Cowling wasn't completely aware of what had gone on". I felt at times that she carried a certain animus into the witness box with her.
40. Mr Springett (evidence for the Claimant): Mr Springett was a chartered surveyor. Between July 2003 and September 2006 he was Area Director of the Government agency, English Partnerships ("EP"). He gave detailed evidence about the position of EP generally and specifically in relation to the Site and the adjoining pieces of land. He gave evidence relating (inter alia) to planning processes, the attempts made by farmers to pressurise him, and his relations with the Company, Mr Cowling, Mr Lawrence and Earlplace and others. He gave his evidence frankly. When confronted with documents he was not shy in giving a robust response. He had great experience in the issues he was giving evidence about and had thoroughly prepared himself to give evidence by obtaining access to EP's papers and studying them. I found his evidence informative and helpful on the issues that it was relevant to.
41. Mr Andrew Cowling, the First Defendant: Mr Cowling gave evidence over two full days. He gave clear, knowledgeable, answers and found himself agreeing with many of the questions and propositions put to him by Mr Reeve, counsel for the Claimant. On a number of occasions he freely gave evidence which was contrary to his best interests. In judging the credibility of a witness, the fact that the witness is prepared to give answers adverse to his interest is something that can be taken into account when there are conflicts of evidence to be resolved. I have not accepted everything that Mr Cowling has said by way of evidence or explanation but, on balance, I considered him to be candid and to be attempting to tell the truth and to assist me.
42. Mr. Richard Grove: Mr Grove was a Director of Earlplace. He was summonsed to give evidence and I allowed both counsel for the Claimant and the Second Defendant to cross examine him. He openly agreed that he did not wish to be giving evidence but, being in court, he gave as full and fair an account of events as he could. He corrected certain information in an informal statement that he had earlier signed in order to reposition the date of the meeting during which he, Mr Malby and Mr Lawrence discussed and agreed the terms of Mr Lawrence's retainer. This was an important correction and he was questioned about the accuracy of his recollection of events. In certain respects his recollection of the precise turn of events was patchy. I formed the view however that he was endeavouring to assist me.
43. Mr Tim Malby: Mr Malby was a director of Earlplace. He was in a similar position to Mr Grove. He had been summonsed to give evidence. It was put to him by Mr Reeve that in fact he was in substance Mr Lawrence's witness. Mr Malby did indeed communicate with Mr Lawrence's solicitors and did have a number of conversations with Mr Lawrence prior to the case starting. Further, certain views expressed by Mr Malby did find their way into Mr Lawrence's statement and they were initially sought to be relied upon as admissible hearsay. I bore in mind the possibility that Mr Malby should in fact be treated as a witness for the Second Defendant. In the event, I found that Mr Malby gave his evidence fairly and in certain important respects it was adverse to Mr Lawrence, I have not concluded that I should discount his evidence or the weight to be attached to it. I found his evidence, on the issues he addressed, to be fair and balanced.
44. Mr Neil Lawrence, the Second Defendant: Mr Lawrence was extensively cross examined by Mr Reeve. When pressed he was compelled to give answers which were very much against his own interests. In the event, I concluded that he was endeavouring to give his evidence fairly albeit that I have not accepted a number of important conclusions that he arrived at in relation to various central matters.
45. Mr Julian Stephenson (planning expert for the Claimant): Mr Stephenson gave expert evidence as to planning matters on behalf of the Claimant. He addressed: the use of the Site given the existing planning permission; the developable area of the Site as well as the potential developmental area of the Site combined with the adjacent D1 site; the proposals for alternatives uses of the Site; and, the prospects for alternative uses for the Site and adjoining land. The basic thrust of the opinion was that the case for development of B8 on a single site application or in relation to the two sites (the Site and D1) was "strong". The development case for the Green Space to the south of the Site was less compelling but nonetheless there was, in his opinion, considerable "political pressure" including from English Partnerships for a change of use. He concluded that "a competent practitioner would have advised the company to market these opportunities to prospective purchasers". He would have advised against a planning application being lodged which "would have restricted" the options. He was of the ultimate opinion that the First and Second Defendants fell below the standards expected of a competent surveyor and agent and in the case of Mr Cowling, director. In the course of cross examination, on occasion he was surprised to be presented with evidence of the actual rough and tumble of what was going on in relation to the Site and reluctant to accept the relevance of documents put to him concerning the significance of those actual events. Although I have not accepted Mr Stephenson's conclusions, I am clear that he was aware of his duties to the Court and sought to perform them.
46. Mr Mark Whitfield (expert on valuation and marketing for the Claimant): Mr Whitfield gave evidence on: the state of the market; existing use value; development opportunities and residual value; sales mechanisms; value, including development value; and competent marketing. The thrust of his opinion was that the market appetite for land of the nature of the Site was "strong" even in circumstances where planning issues or concerns resulted in "uncertainty". He was of the opinion that in such circumstances conditional offers were "commonly agreed". He also expressed views about the facts as he understood them on the ground. For instance he formed the view that Mr Springett of EP fully recognised the realisable combined development value of the Site and that adjacent to it. He said that it was "clear" that EP was a potential purchaser of the Site and that EP would have been interested in pursuing a wider development including the Site along with D1 and the Green Space. He also says it is "clear" that Mr Springett recognised the need to trade clawback for a right of access to the Green Space and he says that it was an option that Mr Springett "clearly indicates that he was prepared to have pursued". In relation to the prospects of planning change of use, he expressed the opinion that "there was a good prospect of securing planning consent for B2/B8 redevelopment". Although I have not accepted Mr Whitfield's conclusions, certainly not in the absolute terms in which they were expressed, I am clear that he was aware of his duties to the Court and sought to perform them.
47. Mr Thomas Lindley (expert for First and Second Defendants): The Defendants served a brief joint report which addressed the current market value of the freehold interest in the Site. He also expressed an opinion on whether the marketing and other efforts of the Defendants qua partners of MCL fell below the standards of reasonably competent commercial estate agents. The thrust of his opinion was that the market value realised for the Site exceeded the market value of the unencumbered freehold of the Site which he valued at £1.45m. He concluded that the allegations of negligence were not made out.

(2) Observations on limitations in the expert evidence

48. In relation to the expert evidence generally, a good deal of it was opinion as to whether the Defendants were negligent and it was based upon documentary evidence the experts had reviewed. A real difficulty with some parts of the expert opinions was that they were based upon assumptions about the facts that I simply do not agree with. As such, the opinion evidence was often wide of the mark. This is a perennial problem with experts of all kinds who are asked to express opinions which are based upon assumptions which are fact dependent or which purport to be the expert's conclusions or inferences arising from facts they record and treat as valid. If the expert does not see or comprehend the relevance of a particular document, or fails to see the entire body of evidence relating to a particular point, or fails to take on board oral evidence given by witnesses which put a document into context and which casts new lights upon events, then this can seriously skew the final opinion. The facts of this case are very much in point. The experts all agreed that the value of the Site was, in material part, dependant upon the willingness of the local planning authority to grant a change of use and upon the appetite of the market to bid for land with the particular issues that surrounded this Site. However, this in turn depended upon a wide variety of interwoven matters including, but by no means limited to: the approach of individual planning officers; the power of the local farming lobby to influence planning policy; the internal policy of EP and the particular views of Mr Springett to the Site and also to his view of Prologis and whether EP wanted to do a deal with Prologis on this or in respect of some other piece of land; the dynamics of the transition of planning authority power from NBC to WNDC; the history of failed offers for the site; the financial position of the Company, etc. The expert reports did not however cover this material to any great degree at all. Further, it was not apparent to me that the experts had addressed their minds to whether they needed to update their reports in the light of the evidence as it unfolded during the course of the trial. Where, as here, important issues for the experts turned substantially upon precise facts, then I would have expected an effort to have been made in an appropriate way (supplemental report etc) to take account of this moving tableau of relevant evidence. In consequence on those aspects of the case that were fact dependent I did not derive a great deal of assistance from the expert opinions.
49. I have however addressed particular issues arising in the course of the expert evidence in the analysis below as and when it arises.

C. THE FACTS

(1) Introduction

50. I turn now to set out the facts in detail. My narrative represents the findings of fact that I make in relation to the issues arising. The evidence, written, documentary and oral, was voluminous and ranged widely. It has not been necessary to resolve every outstanding dispute of fact that emerged. Additional findings of fact (in relation to breach of fiduciary duty) are also set out in section E below.

(2) The original sale of the Site from the Commission for New Towns to the Company: The overage or "clawback" provisions

51. An important starting point is the original sale of the Site into the hands of the Company back in 1996. A key aspect of this is the overage or clawback provisions contained in the original sale agreement.
52. The Site had clear development potential. It is close to junctions 15, 15a and 16 on the M1 motorway. It is also adjacent to the Brackmills industrial estate. Northampton is a prime centre located in the middle of England for logistics and warehousing.
53. By an agreement dated 28 February 1996 CNT sold the land to the Company for a relatively nominal consideration of £52,000. However this was coupled to an overage (or "clawback") provision. This provided that CNT would be entitled to a percentage of the increase in the value of the Site over a base value of £1.2m in the event of a change of planning use. The clawback initially amounted to a figure of 100% of the incremental increase in value but then reduced over time. For present purposes the relevant point in time at which to assess the impact of the clawback was 2004-2006 and, at the time, the clawback stood at 40% of the increase in value. Accordingly, on any sale of the Site on a basis which included a permitted change of use, i.e. planning permission, the Company would pay 40% of the increase in value over £1.2m to EP. The effect of this would be as follows:

Sale Price for Development (£)	Clawback 40% (£)	Sale Price less Clawback (£)
5.0m	1.520m	3.480m
4.5m	1.32m	3.18m
4.0m	1.12m	2.88m
3.0m	0.72m	2.28m
2.5m	0.52m	1.98m

54. It follows that a conditional offer for the Site which involved the Company being paid some portion of the consideration contingent upon planning permission for change of use, would have resulted in the Company becoming liable to pay EP the clawback. This was, intrinsically, a difficulty with any conditional deal. A point worth noting at this early stage is that EP soon came to realise that they had missed a trick. They failed, when selling the Site, to retain for themselves a right of way across the Site to the Green Space to the south. As such they created a "ransom" possibility for the Company, as new owner, if ever EP wanted or needed to exploit the Green Space.
55. A prospectus was issued in February 1996 which recognised the development value of the land. It stated:

"The Directors believe that because the Property is located adjacent to existing and proposed commercial developments, it has long term development potential. This potential is recognised by the Vendor who has reserved the right to share in any development profits for a period of 21 years.

The Directors will monitor the use of the Property to maximise any current and future potential. The Vendor recognises that the Property has future development potential and has included within the heads of terms a clause giving the Vendor a proportion of the development profits in view of the preferential purchase price".

(3) The original planning permission for the Site

56. Planning permission was granted by Northamptonshire Borough Council – NBC - as the Local Planning Authority under the Town and Country Planning Act 1990 to the Site in September 1995. It was "… for the development consisting of auction and sale centre with associated facilities and overnight lorry parking area at land adjacent to Weddell Way, off Lilliput Road, Brackmills, Northampton…".
57. The Local Plan for 1997 records that B8 permission was given to allow the relocation of the livestock auction out of the city centre and to the Site. There was an ambiguity about the Local Plan that caused considerable debate amongst developers. The initial 1997 Local Plan did not expressly prohibit the use of the Site for other B1, B2 or B8 purposes; but nor did it expressly permit such usages or suggest that the planning authorities would adopt a sympathetic approach to further applications for change of use. The Site was used mainly for the auction of livestock. However, the permission was not, as drafted, so limited. In February 2005, NBC set out its position in response to a letter from Mr Lawrence (dated 2^nd February 2005) seeking confirmation that the Site could, within its existing consent, be used as a car auction and sales centre (i.e. sale of prestige and imported vehicles), a receivership auction centre (i.e. sale of bankrupt goods, written off vehicles, plant and machinery, office furniture, etc), and, a commercial vehicle auction centre. On 15^th February 2005, Mr Richard Fox, Assistant Head of Planning, confirmed that upon the basis of the information available (and of course without prejudice to any future decision of the Council and Local Planning Authority): "the uses to which you referred are within the authorised use of the site and would not require planning authority".

(4) The financial position of the Company in the wake of the Foot and Mouth crisis leading up to the decision to sell the Site

58. The Company was under financial stress from the outset of the foot and mouth crisis. Over the ensuing 4 years the financial position worsened. In 1999 the Company had a turnover of £1.136m and in 2000 this increased to £1.209m. Following the crisis turnover collapsed to £0.462m (2003); £0.246m (2004) and £0.135m (2005).
59. Mr Robinson, a witness called for the Claimant and a director of the Company at that time, accepted that as time progressed the position of the Company became "dire" and that it survived by the courtesy of its bankers (RBS).
60. The Board expressed concern from an early stage that losses being sustained exceeded those the Bank was aware of. Board minutes for a meeting on 8^th November 2001 record a debate about whether proper accounting records were being maintained. The results for the year ended 30^th June 2001 recorded total losses in the region of £200,000 and various directors were worried that the Company was trading illegally. There was a discussion about whether directors should resign. It was resolved, inter alia, to appoint an accountant to prepare a cash flow for the next three months and to seek the advice of an insolvency practitioner.
61. The financial woes of the Company were alleviated, but only slightly, by an agreement with RBS to grant to the Company a facility of £400,000 to the end of March 2002. This was an increase on the existing facility of £250,000 but carried with it interest of 3.5% above base on the incremental £150,000, compared with the 1.5% above payable on the first £250,000. There was also to be paid a fee of £5000 upon a successful sale of the site. At the end of 2003 the Company returned to RBS for an extra £50,000. The Bank extracted its pound of flesh. For agreeing to lend a further £50,000 the Bank demanded a 6.8% stake in the proceeds of any sale of the Site and required the Company to remain in credit in its current account and to pay interest quarterly.
62. In November 2003 Mr Cowling convened a meeting at the Livestock Market to which the public, but in particular local farmers, were invited. In his Chairman's statement Mr Cowling was forced to say this:

"However, and I am sure you are all aware, the last nine months have seen hard times for almost all sectors of agriculture. We have also suffered financially and the Directors have carried out a thorough review of the business carried on here at the market. Frankly, the business is not viable at present and the outlook is bleak, in that I cannot see sufficient turnover in the months ahead to sustain the business without eating into shareholders funds"

63. Nothing improved in 2004. The directors lent £30,000 to the Company which, notwithstanding, went into overdraft in June, October and December in order to meet interest payments. Mr Cowling was in constant communication with the Bank with a view to seeking to persuade them to maintain funding. He kept them updated on the nature of existing offers for the Site.
64. On 24^th June 2005, Mr Woolfe of RBS wrote to Mr Cowling referring to previous correspondence and telephone conversations. He recognised that the Company was at that time seeking to negotiate a sale of the Site and understood there to be two offers on the table. His concern was to ensure a speedy sale:

"From the Bank's…point of view we have no objection to either of these offers being accepted, effectively whoever gets to exchange quickest, as long as the debts with us and the sum due…is paid."

65. Mr Woolfe stipulated that with regard to the interest payment due at the end of June (which Mr Cowling had explained the Company was not in a position to meet), this was for the shareholders to service. The Bank was not in principle sympathetic to any further general flexibility. He did not state what would happen if banking covenants were not met but the implicit threat was obvious and was understood as much by Mr Cowling. Mr Woolfe however added this:

"However, given the expected time scales to achieve a contracted sale and assuming that in case of need we can get the protection we need for you and London and Cambridge over the Property Agreement fee. Then we will be willing to defer the above payments pending receipt of the sale proceeds."

66. This letter is consistent with Mr Cowling's evidence that in 2005 the Bank wanted a sale in the quickest possible time in order that debts to the Bank were repaid. The Bank was not prepared to grant further indulgences over the quarterly interest payment save only that since the bank expected a sale to occur in the near future it was prepared to await that sale. Absent a sale there was a genuine risk that the Bank, as the main creditor of the Company, would place the Company into administration and in such circumstances, Mr Cowling was concerned that there would be a fire sale of the Site which sought only to cover the indebtedness to the Bank and that there would be nothing, or very little left over, to return to the shareholders. In the event, the sales that Mr Woolfe believed were imminent fell through such that very shortly after the June 2005 letter, there were no offers on the table at all. This was highly relevant to the way in which Mr Cowling viewed the possibility of a sale to Earlplace.

(5) The Prologis Agreement

67. On 28^th December 2001 Prologis Developments Limited ("Prologis") expressed interest in the Site. They made an offer of £4m gross of clawback (which amounts to £2.88m net). The Board discussed the offer. Proposed Heads of Purchase were compiled with Prologis on 11^th June 2002. A conditional contract was signed on 4^th April 2003 for the conditional sale and development of the Site. The sale was subject to satisfaction of a "Condition Precedent". This was that the "Unconditional Date" should occur prior to the Termination Date. The latter date was defined as the first to occur of (i) the date on which proceedings are exhausted and a satisfactory planning permission is not granted or (ii) the fourth anniversary of the agreement. In other words, unless planning consent was obtained within four years the agreement lapsed. Within that timeframe, Prologis was obliged to apply for planning permission (clause 19) and, if successful, purchase the Site at a rate of £400,000 per developable acre. On grant of planning permission Prologis was to pay a further sum equal to the clawback payable to EP. A further Development Agreement was entered into with the Company for a 50/50 profit share upon the successful completion of a development scheme.
68. For a variety of reasons the agreement, though prima facie very attractive, ran into the sands. The Company used MCL to act on an unremunerated basis for it during this period. Mr Cowling asked Mr Lawrence to assist Prologis seek and obtain planning change of use. Mr Lawrence attended a number of meetings with NBC, EP and others in relation to this project. He did this on behalf of the Company since it was obviously in the Company's interests that Prologis should succeed in obtaining planning permission. However, as I have set out elsewhere in this Judgment (see paragraphs [77-83, and, 98-102]) both NBC and EP proved obstructive. It was clear that planning permission for change of use on the Site was going to be extraordinarily hard to achieve. And as for the chances of Prologis and the Company coming to terms with EP for a comprehensive deal involving the Site and EP's adjacent land (D1 and the Green Space) this also proved remarkably difficult. Indeed, the evidence shows that EP ultimately took the view that Prologis should "butt out" of the agreement with the Company (see paragraph [78] below).
69. Not surprisingly, Prologis formed the view that they were better off seeking development opportunities elsewhere and they approached the Company to unwind their agreement. This was in or about late September/October 2004. It was because of this loss of confidence on the part of Prologis that Mr Cowling instructed MCL to seek to market the Site again. Indeed, as is set out in paragraph [108] below, Mr Cowling expressly refers to the Prologis difficulties in that letter. A few months later, in early 2005, Mr Alan Curtis of Prologis made clear to Mr Cowling that he wanted out, and this was relayed to the Board at a meeting on 8^th February 2005 at which the Board gave Mr Cowling express authority to negotiate a release of the agreement.
70. A dispute arose in the course of the evidence about whether there was a binding agreement between Prologis before 23^rd September 2005 to release Prologis from the agreement. In my view the precise means by which Prologis were released is not relevant. I accept that the commercial assumption that initially underlay the agreement, was that the Company and Prologis had a good chance of obtaining change of use permission and that, had that been the case, they would both have benefited financially. However, I also find that this early optimism proved unfounded and it soon became clear that the sensible course was for the parties to unravel the agreement. The question for me is whether Mr Cowling's handling of the Prologis contract was negligent. I do not take this view.

(6) The conduct of the minority shareholders and the farming interests

a) The tactics deployed by the farmers' contingent

71. The strength of the opposition to any change of use away from that of a cattle auction is relevant to a number of points. In particular, it affects the value that can be attributed to both (i) the "hope" element of an unconditional offer and (ii) the value to be attributed to the land under a conditional deal based upon an expectation of obtaining planning consent. It is hence relevant to Mr Cowling's decision in October 2004 to market the Site with an emphasis on existing use and unconditional offers.
72. The facts show clearly that there was a strong, articulate and persuasive farmers' contingent that sought to do everything in its power to prevent the NBC (and in due course WNDC when it assumed responsibility from NBC for planning matters) from altering its planning policy away from using the land for a livestock auction and to prevent EP from doing any deal with the Company which precluded the continuation of a cattle market. The pressure was highly effective and created a real blight on the realistic chances of obtaining a change in planning use without a tooth and nail fight which would culminate in protracted planning appeals and litigation. I refer below to a few illustrations which give the flavour of the matter. Other examples are referred to elsewhere in this Section C of the judgment.

b) The Spoiler

73. For instance, in and around the summer of 2002, Mr Brodie of Henry H Bletsoe and Son, agricultural and development consultants, chartered surveyor and valuers, wrote to David Alderson, Head of Planning Transportation and Regeneration at NBC. He started by referring to a meeting he and Mr Richard Sawbridge (a local farmer and minority shareholder in the Company) had held with Mr Alderson and his team and then proceeded to set out in an attractive and cogent manner a variety of different reasons why change of use should not be accorded to the Site. The letter refers to the fact that at the earlier face to face meeting there had been discussion of the possibility of the submission of an outline application for redevelopment "…in order to provide the Borough Council with an opportunity to refuse planning consent". Such a "spoiler" was in fact submitted on 29^th November 2002 for "change of use to B1/B2/B8". At a meeting of the Planning Committee on 29^th January 2003 it was duly refused upon the following basis:

"The proposed use would result in the loss of a cattle market/auction and sales centre which offers diversity in Northampton's economic base and for which there is an established and potential need. The applicants have not demonstrated that the site should be released for general employment use and the application is contrary to the provisions of the Northampton Local Plan Policies B3 and B8 for these reasons".

74. Objections were received from, inter alia, Great Houghton Parish Council which was located close to the Site and which was concerned as to the impact upon them of any change in use. In addition 103 letters of objection were received from farming interests.

c) The minority shareholders attempt to wind the Company up

75. On 3^rd April 2003 the farmer shareholders in the Company, in particular Messrs Sawbridge and Wooton, exercising their Companies Act powers qua shareholders, requested an EGM. They demanded answers to questions they posed to the Board and they sought a special resolution to wind the Company up. The request for answers from the Board sought, to put it kindly, to embarrass the Board by suggesting that the Board was destroying shareholder value through its strategy of selling the Site. They referred to a recent negative decision of NBC in relation to refusal of planning consent; this was of course their own spoiling application. They then forced a vote on their special resolution to wind the company up. This was defeated.

d) The pestering telephone calls

76. In November 2004, in a farmers' consortium update, Mr Brodie reported that he was having difficulty getting Mr Springett of EP to call him back. So he recommended "…a brief campaign of pestering telephone calls". He set out Mr Springett's office number. He urged all of the farmers' consortium, totalling some hundreds of people, to call Mr Springett over the next week or so in order to persuade him to succumb to the demands of the farmer's consortium. Mr Springett did in fact receive hundreds of calls and in his evidence accepted that the farmers were seeking to pressurise him. When asked about this Mr Springett was phlegmatic and said that he did not succumb to pressure and his secretary took the calls. However, Mr Springett also accepted that the farming lobby was a serious force to be reckoned with and there is no doubt but that EP was highly influenced by the pressure imposed by the farmers.

(7) The position of English Partnerships (EP)

77. The position of EP towards a comprehensive development was not always consistent. Their position was thoroughly canvassed in Mr Springett's evidence and is clear from numerous documents. I set out below a selection of the evidence reflecting EP's position in the period 2004-2006. This shows the hostility of EP towards Mr Cowling and Prologis in 2004/2005 and the success of the farmers' contingent. It also provides contemporaneous evidence of the value EP attributed to the Site under various permutations. It also shows that the allegation, made by the Claimant, that the Company could easily have concluded a stand alone agreement with EP by using the "ransom" value attributable to the fact that the only viable access to the Green Space was from the Site as a means to trade away the clawback, was unrealistic. The evidence further strongly supports Mr Cowling's evidence that Prologis was deeply frustrated with EP who represented a major obstacle to a re-development of the Site and it corroborates Mr Cowling's evidence that pursuing a deal with Prologis was not likely to prove fruitful.
78. The first example shows how pressure from the farmers caused EP to adopt a very negative and uncooperative approach to the Company and EP. In an update letter of 6^th October 2004 from Mr Brodie to the farmers' consortium he refers to the fact that he had held an extremely positive and encouraging meeting with Peter Springett of EP in which the latter threatened the use of compulsory purchase powers (which he knew in truth he did not actually have) and during which it is recorded that Prologis had been told to "butt out":

"Peter Springett implied that he was prepared to put pressure on Andrew Cowling and Prologis, firstly, by hinting that he would be prepared to use compulsory purchase powers and, secondly, by indicating to Prologis that, if they butt out of this site, there may be other opportunities for them to get involved on land currently belonging to English Partnerships".

Mr Lewis put the following questions to Mr Springett:

"Q. Is that accurate, did you tell Mr Sawbridge that you were going to apply pressure to Mr Cowling and to Prologis and tell them to butt out of the site?

A. Well, it certainly wasn't my best use of Anglo-Saxon, but -

Q. No is it accurate, yes?

A. It is accurate within the context at that time.

Q. Yes.

A. I was negotiating elsewhere with Prologis in regard to a much larger development opportunity, one where there was every prospect of reaching an agreement, and we subsequently did."

79. And later in the same cross examination Mr Springett became coy:

"Q. You speak of applying pressure to Mr Cowling, what pressure is that?

A. I really don't – I can't give you any substantive answer to that comment."

80. When Mr Springett saw the particulars of sale issued by MCL in relation to the Site, he expressed the view that the asking price for the freehold of £3.5m was "lunacy". He also made clear in evidence that EP was not interested in buying the Site. He also explained that EP adopted a cautious approach to intervening in the market and would generally refrain from doing so if it risked pushing prices up. He was fully aware that he could not deploy compulsory purchase powers.
81. The flavour of the approach adopted by EP, and Mr Springett, is also given in an update letter from Mr Brodie to the farmers' consortium dictated on 7^th December 2004. He refers to a meeting attended by David Alderson and Jenny Chance (NBC), Peter Springett (EP) and Mr Lawrence who was there to promote the Prologis transaction. Mr Brodie states:

"Apparently, during the course of the meeting, David Alderson made it very plain once more to Prologis that there was no prospect of them securing planning consent for any scheme which did not allow the cattle market to re-open from the existing premises."

Later in the same letter he records that he had spoken to Mr Michael Wreford:

"…he indicated that he understood that Prologis were now totally fed up with the cattle market site and were anxious not to upset either the Borough Council or English Partnerships. He has heard that Prologis would, therefore, be very happy to simply recover the money they have put into the deal and walk away from the site, allowing them to concentrate on other, more positive schemes elsewhere in the region. If this were right, it would certainly be encouraging but, for the moment, I am going to take that with a "pinch of salt"".

82. When cross-examined about this Mr Springett stated as follows:

"A. Well I accept that we were not able to reach an agreement with Prologis on terms that I could recommend. Clearly it was for them to take their own commercial decision. They had an agreement in place with Northampton Auctions Plc which required certain actions on their part."

83. It was put to him that he had told Prologis that they should "move away" from the Site. Mr Springett responded:

"A. I don't recall ever telling Prologis to move away from the Cattle Market site. I fully accept it is the sort of comment I may have made in a round table meeting."

84. Evidence as to the value which EP placed upon the Site is found in advice given to EP by a consultancy firm, DTZ, in response to the proposal put to EP by Mr Lawrence (now acting for Earlplace) in November 2005. It is worth analysing the advice in some detail, since it highlights a number of points beyond valuation such as the "ransom" value of the access right from the Site to the Green Space. The proposal started by identifying the three areas of land in issue together with their gross and net acreage. It then attributed a valuation per acre:

"i) Site D1 has a gross acreage of 12.785 and a net acreage of 11,000. The value per acre is £475,000 and the total value is £5,225,000.

ii) The Earlplace Site has a gross acreage of 12.730 and a net acreage of 10.000. This gives a value per acre of £450,000 and a total value of £4,500,000.

iii) EP green field site with a gross acreage of 36.569 and a net acreage of 30.000. This leads to a value per acre of £400,000 and a total valuation of £12,000,000."

85. The proposal then stated the following about each of the sites:

"Land Area 3 (English Partnerships) is land-locked by Land Area 2 (Earlplace). Assuming that with planning permission, Land Area 3 is valued at £12,000,000 then English Partnerships will be due to pay Earlplace not less than £4,000,000 to provide access to this parcel of land.

In addition, the terms of Earlplace's purchase of Land Area 2 provide for a claw-back to English Partnerships equating to 40.00% of the enhanced value over and above £1,200,000. Assuming that with planning permission, Land Area 2 is valued at £4,500,000 then Earlplace would be required to pay English Partnerships the sum of £1,320,000.

Land Area 1 (English Partnerships) currently has planning permission for a transport depot and as such is valued at £3,850,000. By relocating Wrefords to Land Area 3, Land Area 1 increases in value by £1,375,000 to £5,225,000.

Therefore, Earlplace's added value to the proposed scheme equates to £5,375,000 (£4,000,000 + £1,375,000).

It is therefore proposed that Land Area 1 be transferred to Earlplace for £1, but the consideration is the "added value" - £5,375,000."

86. Land Area 3 was the Green Space; Land Area 2 was the Site; and, Land Area 1 was D1. DTZ considered that various aspects of the Earlplace offer were inadequate and did not reflect the fact that Earlplace would struggle to obtain planning permission for the redevelopment of the cattle market in isolation. Earlplace therefore needed the assistance of EP to "…help unlock/maximise the value of their land holdings". DTZ stated:

"In our opinion Earlplace are in a weaker position as politically the cattle market is a sensitive issue. It would in our opinion be difficult for them to secure planning permission for a redevelopment of the entirety of their site. They are likely to meet resistance for redevelopment in isolation particularly considering Keith Barwell, who is now heading up the West Northampton Development Corporation and is a keen promoter/supporter of the Cattle Market. If permission were forthcoming it is more likely that would be either for the continuation of a cattle market and a granting of planning permission on the remainder of the site. They may achieve this by adopting the "enabling development argument" therefore seeking release of their green belt land of 2.4 acres (net) to cross fund the retained Cattle Market."

87. In relation to the potential for the relocation of the cattle market to EP Land, DTZ stated:

"If redevelopment of the Cattle Market was seen as part of the comprehensive redevelopment of the entire site including the EP Bedford Rd and Greenbelt sites and potentially part of the EP Greenbelt Site is utilised to provide a new Cattle Market facility, there is in our opinion potential for an enhanced planning permission."

(Italics added).

88. DTZ proceeded to set out the options which it considered were open to EP. It identified two principal options which it termed "Scenario A", and, "Scenario B". Scenario A assumed that EP and Earlplace would undertake the development of their respective sites independent of each other. DTZ assumed that Earlplace would obtain a change of use for the Site and that any development by Earlplace would therefore trigger the claw-back and would hence lead to a payment to EP. DTZ concluded that 7.6 acres would be valued at £450,000 per acre with a total value of £3,420,000. It valued the Earlplace greenbelt part of the Site of 5.13 acres at £51,300 (£10,000 per acre). It calculated the clawback at £888,000. The underlying assumption was that only 7.6 acres of the total acreage of the Site would be subject to re-development. It placed a total net value on the Earlplace site of £2,583,000. This is just over £300,000 in excess of the consideration obtained by the Company for the Site in the sale to Earlplace.
89. Scenario B valued the Site as part of the comprehensive development. DTZ stated:

"The following is a financial assessment of the land interests and the uplifts in value of the entire land holdings assuming a comprehensive scheme was promoted to open up EP's Greenbelt site and the Greenbelt/agricultural element of the Cattle Market Site. It should be noted that in order for such a scheme to be promoted that an area of land will need to be identified for a replacement Cattle Market."

90. DTZ valued the EP sites (D1 and Green Space) at £17,500,000; 10 acres of the Earlplace site at £4,500,000; and the "combined land value" at £22,000,000. It applied apportionment ratios of 72% in favour of EP and 28% in favour of Earlplace. Applying this apportionment the value of the Site to Earlplace was £6,160,000 which amounted to an increase of £3,576,700 in excess of the Scenario A valuation.
91. The nub of DTZ's advice was in the following terms:

"Assuming the assumptions made in this report are correct we propose the following response to Earlplace in the first instance.

We will forego the overage due on the Cattle Market site in return for an unrestricted/unfettered access to the EP Greenbelt land.

If this is unacceptable to Earlplace we would look to negotiate a settlement as detailed or close in financial terms as set out in Scenario B within this report.

If agreement could be reached, the project should proceed on a subject to planning basis. Costs should be financed in the agreed apportionments of 72%/28%."

92. DTZ considered that the figure of £6,160,000 might be conservative (i.e. unfavourable to Earlplace) because it recognised that for a comprehensive development to occur EP would have to pay a substantial (ransom) sum to Earlplace to secure access. It was evident to DTZ that the value of unrestricted access to EP to the Green Space from the Site might substantially exceed the value of the clawback.
93. In February 2006, discussion occurred between Earlplace and EP about the prospects of working together with a view to "a comprehensive scheme". This was after exchange of contracts between the Company and Earlplace but before completion. Mr Springett raised the possibility of trading off the clawback for access from the Site to EP's other land (and in particular the Green Space). He stated in an email to Tim Malby of Earlplace:

"We have previously discussed the basis on which a comprehensive scheme could move forward and clearly we will need to reach agreement on a number of issues in order to deliver this not least of which are financial terms.

It may be helpful, therefore, if I reconfirm the basis on which I am able to recommend to English Partnerships to proceed and having regard to the User restrictions and Clawback provisions that were put in place when the site of the former cattle market was originally sold.

Put simply and on the basis of the comprehensive scheme, securing planning consent and being deliverable I am able to recommend to English Partnerships that in exchange for the unfettered right to vehicular access and service provisions though the former cattle Market site and for the benefit of servicing English Partnerships land to the south, English Partnerships will waive the restrictive covenant and forego any clawback payment".

94. Mr Springett's position was very optimistic (and he knew it). He contended that the clawback had the same value as the "ransom" value attributable to the right of access, even though the DTZ advice was that it did not. Earlplace, not surprisingly, did not agree. Mr Grove from Earlplace responded and pointed out that as land values were at that point in time increasing "the gap between the relevant values is widening as time goes on". He commented that the value of agreeing to grant an unfettered right of vehicular access and service provisions through the Site "far outweighs the value of the restrictive covenant and clawback in favour of" EP.

(8) The position of the planning authorities to change of use

95. The relevant planning authorities (first NBC and then WNDC) became increasingly hostile to a change of use in the Site away from a cattle market. This position only softened once the possibility of there being a relocation of the cattle market to some other site as part of a wider comprehensive redevelopment of the Site along with the adjoining EP sites, became a possibility.
96. The relevance of this is two fold. First, the position of the authorities was well known to all concerned (Prologis, MCL, Mr Cowling and the Company); and secondly, some of the same information (but not all of it) would have been available to third parties such as developers and their planning agents and consultants. The likelihood of planning consent being given was a factor that was relevant to valuation. Mr Stephenson, the Claimant's expert on planning, accepted that any competent adviser and developer would conduct a thorough review of the planning history and would identify all publicly available documents, press reports etc and would even seek to obtain correspondence involving planning officials. He observed that a lot of information is available on the internet.
97. My findings on this are as follows.
98. First, the position of NBC as the relevant planning authority was that unless a solution was found to the cattle market the authority would look negatively upon any application for a change of use at the Site.
99. Secondly, WNDC, as successor to NBC as planning authority, was also hostile to a planning change of use that did not cater for the continuation of the cattle market. Indeed, Mr Keith Barwell in September 2005 (as reported in a letter from Mr Brodie to Mr Sawbridge dictated on 20^th September 2005) as Chairman of the new authority is reported to have taken a very narrow view indeed:

"However, apparently Keith Barwell had expressed frustration with the matter and had expressed the opinion that he did not want to get tied up in a scheme which involved the construction of a completely new livestock market, whilst there was a perfectly good existing cattle market still standing. Mike indicated that Keith Barwell had given the impression that he was going to "sort out" Andrew Cowling, presumably with a view to bringing the existing cattle market back into use"

I did not hear directly from Mr Barwell, Mr Brodie or Mr Sawbridge so that the accuracy of this cannot be vouchsafed. Nonetheless, the underlying message is crystal clear: obtaining a change of use for the Site away from that of a cattle market was very far from straightforward indeed. At base it supports the contention that the only realistic sort of redevelopment that was viable in 2004 and 2005 was one that included providing a satisfactory solution to the farmers in terms of retention of a cattle market either on the site, or on a redeveloped comprehensive site or, conceivably, elsewhere in the vicinity.

100. Thirdly, there was an additional issue with Wrefords Ltd. Wrefords operated a business on the Ransome Road site which was to be redeveloped. One proposal was to relocate Wrefords to the D1 site. NBC granted a resolution for a change of use in June 2005. Wrefords did not wish to be relocated to an alternate site within an overall comprehensive development and was fortified in this opposition by the resolution. In one document (authored by Mr Lawrence dated 30^th November 2005 which in his oral evidence he said was a "good potted history of where we are at") the Wreford's position was summarised. They were: "very reluctant" for operational reasons to move from the site but critically they had an extant resolution from NBC for redevelopment on the site itself. They were accordingly "playing very heavily on the fact that they have had support from NBC". This is relevant for the additional reason that an explanation that Mr Cowling gave for the frustration that he said Prologis experienced and which contributed significantly to Prologis deciding to pull out of its agreement, was that EP was adopting inconsistent strategies. On the one hand it highlighted the potential benefits of a comprehensive redevelopment of the Site with the D1 and the Green Space sites; but at the same time, it was obstructing the realization of that objective by granting Wrefords consent to relocate on the D1 land.
101. Fourthly, the Parish Council of Greater Houghton ("PCGH") had to be kept on side. They were concerned to ensure that any redevelopment did not bring noise and disruption close to them. They did not wish Wrefords to be relocated close to the village. As a result of an earlier planning application by Coca Cola (which had a building on the Brackmills estate) the local Borough Council had given assurances to PCGH which they felt they had to honour and which imposed limits on the ability of developers to develop the Green Space area within the cattle market site. In a note of a meeting between David Alderson and Jenny Chance of NBC, with Peter Springett (of EP) and Mr Lawrence dated 26^th November 2004, there is the following note made: "B8 land at rear of cattle market – eating into greenspace – surely problem with GH Parish".
102. Fifthly, the issue of the redevelopment of the Site either in isolation or in conjunction with D1 and/or the Green Space was a "political hot potato". It was obvious to the Company and all involved in discussions about redevelopment that any proposal that did not cater for the farmers would be rejected by the authority. In March 2006 Mr David Alderson formerly of NBC but now employed by consultants, Hepher Dixon, said in a letter (8^th March 2006) that in his view as of that time "…there would be virtually nil chance of gaining a planning permission across the majority of the sites for the type and scale of development being proposed". Mr Stephenson, the Claimant's expert, believed that the planning authority's decision and the views expressed by specialists such as Mr Alderson were simply wrong in principle. He opined that all could have been rectified on appeal. It is, in my judgment, impossible to know whether this is true or not, or whether the extremely strong political pressures that were being applied would have led to any such hypothetical appeal being rejected. I do not say this because I take the view that an inspector would have acted improperly but it seems to me that the farming interest was strong, and the authorities were adamant, and collectively they would have to put up a very good fight. The position before an appeal would not have been as one sided as Mr Stephenson believed.

(9) The Wollaston Motors Ltd application for temporary change of use

103. On 22^nd June 2004 Wollaston Motors Ltd ("Wollaston") who occupied a part of the Site applied for a temporary change of use to vehicle storage but it was nonetheless peremptorily rejected. This decision was based upon the following reasoning:

"The use undermines the principle of retention of this site for a cattle market/auction and sales centre, which offers diversity in Northampton's economic base and for which there is an established and potential need. The applicants have not demonstrated that the site should be released for a non-related storage use contrary to Policies B3 and B8 of the Northampton Local Plan"

104. Under the heading "Planning Considerations" NBC added that if other, non-cattle market, uses were permitted: "…this could seriously jeopardise the cattle market use being re-established on the site in the future. It is considered therefore that other non-related uses should be resisted unless it could be demonstrated that another site was available to satisfy the need for a market in the area. No alternative use has been put forward to serve the need".
105. Wollaston instructed planning consultants to prepare an appeal. They identified as the key issue on the appeal "whether the use of the building for the storage of motor vehicles would conflict with the development plan, and in any event whether material harm would be caused". In the event, the appeal was never pursued. Mr Cowling advised upon the appeal in his MCL capacity. The "spoiler" (see paragraph [73] above) and this refusal were both concrete examples of the extent of the opposition of the planning authorities to a change of use.

(10) The Letter of Instruction from the Company to MCL of 18^th October 2004

106. Attempts made by the Company to sell the Site from 2002 onwards had proven unsuccessful. Mr Cowling and Mr Lawrence are the sole partners in MCL. On 18^th October 2004 Mr Cowling, in his capacity as Chairman of the Company, sent to Mr Lawrence as partner of MCL, a Letter of Instruction to: "market the site on our behalf on the basis of its existing use as an Auction Centre and Lorry Park". Mr Cowling and Mr Lawrence discussed the terms of the instruction between them before the letter was sent but the decision as to the terms of the Letter of Instruction was Mr Cowling's.
107. The evidence shows that MCL had acted for the Company from circa 2002 onwards in relation to the possible sale of the Site to a purchaser. Mr Cowling, in his oral evidence, accepted that he had no fee paying retainer at that stage and that his involvement with Mr Lawrence qua partners in MCL was speculative in that they merely hoped that in due course their work would lead to remunerative work. But he also accepted without hesitation that both he and Mr Lawrence were acting for the Company and owed fiduciary duties notwithstanding the absence of any immediate remuneration. He said that both of them knew that they would be in a position of conflict if they acted for two parties to a transaction without obtaining the consent of the Company, their principal. MCL's relationship with the Company was hence long standing and arose in large measure because of Mr Cowling's position on the Board of the Company, his knowledge of the business and his long experience as a surveyor, and because, to put it shortly, the Board trusted his judgment in matters relating to property sales and valuation.
108. In the Letter of Instruction, Mr Cowling stated that the Company was concerned at the delays being experienced by Prologis in developing the Site which he said were due to inactivity by English Partnerships in respect of the neighbouring land. He continued that as Mr Lawrence was aware the Site was subject to a clawback in favour of English Partnerships should planning permission for an alternative use be granted. No clawback was however payable if the site was sold on the basis of existing use. He then stated "Hence we are not interested in receiving offers that are conditional on a change of use". The letter in full reads:

"Dear Neil,

Re: The Auction Centre, Lilliput Road, Brackmills, Northampton

We are concerned at the delays being experienced by Prologis Developments in developing the above site, which we understand, are due to inactivity by English Partnerships in respect of the neighbouring land.

Following discussions between the Company and Prologis, we can advise you that Prologis are flexible in whether they complete their conditional contract to purchase the site. We therefore instruct your practice to market the site on our behalf on the basis of its existing use as an Auction Centre and Lorry Park.

As you are aware, the site is subject to a claw-back in favour of English Partnerships should planning permission for an alternative use be granted. No claw-back is payable if the site is sold on the basis of existing use. Hence we are not interested in receiving offers that are conditional on a change of use.

Would you please set out your practice's terms for handling the sale on behalf of the Company, together with your recommendations for marketing the site. MAM Transport and S W Wreford & Son, both of whom have expressed interest in purchasing the land, have already approached us. However, there may well be other potential purchasers, both locally and on a more national basis, which you will be able to attract.

We look forward to hearing from you shortly."

109. Two important limitations were accordingly imposed upon MCL. First that the site should be marketed only "…on the basis of its existing use as an Auction Centre and Lorry Park". Secondly, that the Company was not interested in obtaining conditional offers.

11) The letter of advice from MCL of 20^th October 2004

110. Mr Lawrence, on behalf of MCL, responded on 20^th October 2004. He confirmed that MCL was happy to accept the instructions to act in relation to the disposal of the Site. He then sets out his advice. Mr Lawrence did not question or query the sense or wisdom of the two limitations. He fashioned his advice very clearly with the use limitation in particular in mind. The advice can be summarised in the following way.
111. Mr Lawrence stated that MCL would work "closely with you" and would make a "substantial and positive contribution to the disposal of this property". He emphasised that MCL would adopt a coordinated carefully structured and positive marketing campaign to ensure that the "objectives of Northamptonshire Auctions Plc are met". He then set out a marketing strategy which included the use of agency boards and the production of property particulars. In relation to mailing, he identified the interest that might be shown by hauliers at both national and local level and from those national companies which have "requirements for trailer parking and fleet maintenance facilities". He referred to a mailing exercise to target "specific occupier groups located in the main commercial centres in the counties of Cambridgeshire, Warwickshire, Leicestershire, Buckinghamshire and Bedfordshire". In this regard he added the rider that it was "clearly possible" that a potential purchase for a "property of this type" will be advised by a professional agent and that accordingly the particulars should be advertised through the "Agents Clearing House". In respect of advertising he suggests a budget of £3,000 with a highly targeted approach to local property and business press as well as Property News Midlands, Logistics Manager, the Estates Gazette and Property Week.

(12) The particulars of sale

112. Particulars of sale were produced. They stated "Conditional offers are unlikely to be of interest to the Vendor". However, the particulars did not preclude unconditional offers and indeed some were lodged as serious propositions and were put to the Board as such. The advertising made clear that offers in excess of £3.5m were sought for the property which was being sold freehold. No leasehold offers were sought. Copies of extant planning permissions were attached to the particulars.

(13) The fee arrangement

113. In return for accepting instructions on a sole agency basis, MCL was to receive a fee of 1.25% of the final sale price plus expenses incurred in advertising the Site. The normal commission charged by MCL was 1.5% and this was a discount on the normal rate. Mr Cowling described this as "competitive" and I have no doubt that this was a fair description of the fee.

(14) Evidence relating to the value of the Site 1996 to 2006

114. I turn now to consider the value of the Site. A considerable volume of valuation evidence was adduced in the course of the trial. The Site had significant development potential arising because of its proximity to the motorway and to other sites with wider permitted uses. Comparables, referred to by the Claimant's experts, show that high prices were being paid for referable land in the area. However, the fact that a piece of land has potential does not mean that the potential can necessarily be translated into actuality since the planning regime exists to restrict exploitation to uses which comply with a public interest and this might not coincide with optimal commercial use. Of greater value than comparables in this particular case is the history of offers for the Site itself which thereby gives a good indication of the way in which the market valued the Site over time. These show that the £2.25m ultimately paid for the Site by Earlplace was within the range of prices being offered on an unconditional basis. They also show that across the period 2002-2005 a variety of conditional and unconditional offers were made and that none of the conditional offers progressed in a material way.
115. Valuation in 1996 – sale to NA Plc. and NA's initial share subscription prospectus: It is clear from the terms of the contract for sale of the Site to the Company that the vendor considered that there was considerable development potential. It sought a low up front sum but included an overage or clawback provisions reflecting the vendors confidence in the Site's development value. See paragraph [52-55] above.
116. The Marriot Hardcastle valuation December 2001: On 3rd December 2001 Mr Jackson, a then board member, presented to the Board a valuation of the Site from Marriot Hardcastle which valued the Site at £3.8m upon the assumption that planning permission had been obtained. This would trigger a payment of clawback to EP of £1.04m and would leave a net value of £2.76m.
117. Farmers' Consortium bid: October 2002: On 14^th October 2002 the farmers' Consortium offered £1.4m for the Site upon an undertaking that the Company would not enter into negotiations with any third party, save Prologis. The offer was withdrawn on 22 February 2003.
118. The Wrenbridge offer 2002: In January 2002 Wrenbridge Ltd (a developer) offered £1.7m upfront for the land and a Development Agreement with the Company to pay a profit share based up an appraisal that gave the Developer a 25% per annum return on the initial land costs. The profits uplift would then be spit on a 50/50 basis between Wrenbridge and the Company. Various attractive estimates of the scale of the return for the Company were set out.
119. The Cowling valuation: 2003: Mr Cowling personally conducted a "Red Book" valuation of the Site for the Company in about January 2003 in his capacity as a partner of MCL. He valued the Site on two bases. First, on the basis of its existing use at a value of £2.8m; and secondly, on the basis of its development potential at a value of £4.0m. This figure was subject to, inter alia, the clawback which when applied implied a net return to the Company of £2.88m. Mr Cowling stated that in arriving at this valuation he discussed the proposed figures with Mr Lawrence, not least because of his greater experience of comparables. Mr Lawrence independently wrote agreeing with this valuation. In his oral evidence Mr Cowling was asked as to the component of the £2.8m which he would attribute to the "hope" of planning change of use and he said that it would be about 10%. Hence the value attributed to the existing use component was in the region of £2.5m. The figures were used for the purpose of valuing the Company's asset in the accounts for the year ending June 2003 and 2004 and for RBS.
120. The Prologis valuation: I have set out at paragraph [67] above my findings in relation to the assessment by Prologis.
121. Offers generated by the marketing campaign following the Letter of Instruction: On 8^th February 2005 the Board considered five offers for the Site. The minutes show that it was attended by Mr Cowling, Mr Adams, Mr Robinson and Ms Lewington, who is identified as the "Co Sec". In my judgment the minutes accurately reflect the meeting and its composition and the subject matter of the issues arising and decisions taken. It was not suggested to Mr Cowling in cross examination that the minutes were fabricated and there is no evidence suggesting that they are. The minutes record that a report prepared by MCL (authored by Mr Lawrence) was received which set out the offers then on the table. The report was provided under cover of a letter from Mr Lawrence dated 7^th February 2005 providing an overview of the marketing that had been conducted and the offers received. It also provided an update on the position of Prologis (which was that it wished to relinquish its interest in the property on repayment of the deposit plus interest). The report sets out the details of five offers:

i) First, an offer from an agent for an unnamed client of £1.732m

ii) Secondly, an offer from the farmers consortium (led by Mr Sawbridge) of £1.8m

iii) Thirdly, an offer from Harbrora of £3.2m subject only to confirmation from planners that the Site could be used for the auction, repair, servicing and storage of cars together with some ancillary sales

iv) Fourthly, an offer from Denbigh Land of £3.25m subject to written confirmation from the local planning authority that the Site could be used as an auction centre for the sale of motor vehicles and that this was permitted under existing planning consent

v) Fifthly an offer from Frontier Estates Ltd of £4.255m conditional upon planning consent for B1, B2 and B8 usage.

122. Mr Lawrence recommended the Denbigh bid upon the basis that it was the highest unconditional bid. Mr Lawrence said of the conditional Frontier bid that it: "appears attractive, it has been submitted on a subject to planning basis. As you are aware pursuing this route is likely to prove something of a protracted process with no guarantee of eventual success". The Board minutes record that "after some discussions it was unanimously resolved to accept the recommendation from the Agents and accept the offer of £3.25 million from Denbigh Land". It was also decided that the Chairman should correspond with Prologis accepting its offer to withdraw the conditional contract on repayment the deposit and accrued interest. Mr Cowling had full authority from the Board to accept the withdrawal of Prologis. Ultimately none of these offers came to fruition.
123. The London & Cambridge Property ("L&CP") offer: L&CP made an offer for the Site on 30^th June 2005. They offered £3m of which £2.25m was up front and thereafter two further payments would be made (a) £350,000 either on 28^th March 2008 or the date upon which the L&CP obtained B1, B2 or B8 planning consent, whichever was the earlier and (b) £400,000 either on 28^th March 2010 or, again, the date upon which L&CP obtained B1, B2 or B8 planning consent, whichever was the earlier. The agreement also assumed that the parties would set aside a ransom strip to provide potential access to adjoining land owned by EP. In the event that the ransom strip was sold to a third party then L&CP and the Company would share the net proceeds of sale equally. This offer was accepted. However L&CP later withdrew for commercial reasons. I accept Mr Lawrence's explanation that L&CP withdrew having taken planning advice and having conducted their own research and having formed a negative view of the chances of obtaining consent.

(15) The sale from the Company to Earlplace: 2005

124. I set out here certain basic facts about the sale to Earlplace. Additional and much more detailed findings are made in Section E(3) below. On 1^st September 2005, the Company met with Earlplace and agreed in principle that they would sell the Site to Earlplace for £2.25m. Mr Cowling explained that he tried to improve the offer but failed. Earlplace made a firm "take it or leave it" offer. Mr Cowling explained that it was the only offer on the table at that critical point in time.
125. On 14^th September 2005, by a Deed, Earlplace and the Company agreed a "lock out" period whereby the Company would negotiate exclusively with Earlplace until 12^th October 2005 for the sale of the Site. Earlplace paid £20,000 for the right. On 23^rd September 2005, the Company exchanged contracts with Earlplace on an unconditional basis for £2.25m.
126. Mr Cowling sought Board approval for the sale. Mr Cowling gave evidence that on 2^nd September he relayed the £2.25m offer from Earlplace to the then remaining directors: Thomas Adams and Ms Lewington. He says that they were in agreement with the price. An entry in Mr Cowling's diary dated 2^nd September 2005 says "Thomas Adams" which suggests that Mr Cowling was seeking to speak to co-directors at that time. He also says that he told Ms Lewington that Mr Lawrence was representing Earlplace on 31^st August 2005, and Mr Adams when he spoke to him on 2^nd September. He says that neither were concerned about his engagement since they were already aware of his resignation from MCL. He accepts that he did not tell them of Mr Lawrence's terms for the simple reason that Mr Lawrence had not disclosed them. In oral evidence he says, and I accept, that had he been told of the terms of the retainer he would have raised them with the Board. He said he "suspected" that Mr Lawrence's retainer would involve "…a set fee or an hourly rate". But he had no inkling of the unusual nature or scale of the potential fee Mr Lawrence might earn arising out of the sale of the Site to Earlplace.
127. Mr Adams has not given evidence so I have no reason not to believe Mr Cowling's evidence in this respect. There was a dispute as to whether Ms Lewington was aware of the proposed sale to Earlplace. In her oral evidence she was adamant that in fact she had left the employ of the Company as from the end of September 2004 but remained a director thereafter. It was put to her in cross examination by Mr Walker that in fact she was still employed in 2005 and had met with Mr Cowling in late September at the cattle market when he (Mr Cowling) had informed Ms Lewington of the sale and she had agreed with it. There is in fact a record in Mr Cowling's diary for 31^st August 2005 which indicates that Mr Cowling met with Ms Lewington at his office in the market. This, in my view, is material evidence supporting the view that there was such a meeting. Ms Lewington could not recall the meeting but this is in all probability due to the fact that the events in question are nearly 10 years stale and that, as she freely accepted, her recollection of events was not perfect. It was not suggested that Mr Cowling had fabricated his diary records and, on the basis of the evidence I heard from him, I have no reason to believe that in relation to such a momentous decision in the life of the Company, Mr Cowling, as its Chairman, would have adopted a cavalier approach to decision making. In all other respects Mr Cowling appears to have run the Company with a degree of formalism and regard to due procedure. In my judgment, Mr Cowling obtained the consent of the Board to the sale of the Site to Earlplace for £2.25m.

(16) The sale of the Site by Earlplace to Kilmartin: 2005

128. On 23^rd March 2006 Earlplace sold the Site to Kilmartin Ltd for £5m. This was the same day as completion of the sale of the Site from the Company to Earlplace. Mr Grove explained that this was far from being a coincidence. He deliberately timed the two sales to be back to back in order to minimise the cost to Earlplace. In effect they turned a profit of £2.75m on the same day without any material outlay on their part. As a result of the sale, Mr Lawrence became entitled to one third of the uplift, which was calculated as £744,035.02.
129. The evidence as to how the Kilmartin sale came into being is relatively thin. However, on the basis of the evidence that was adduced, I accept that it came out of the blue some months after the exchange of contracts in relation to the sale of the Site from the Company to Earlplace in September 2005. It follows that I find that it was not on the cards or in contemplation when Mr Lawrence agreed his fee retainer with Earlplace on 31^st August 2005 or when the Company and Earlplace agreed the £2.25m sale price on 1^st September 2005 or when exchange occurred on 23^rd September 2005. Further, the £5m paid was well above the rate that the rest of the market considered sensible. As I have already recorded Mr Springett of EP considered that the indicative price of £3.5m set out in the particulars was "lunacy", which puts the £5m price into context.

D. NEGLIGENCE BY FIRST AND SECOND DEFENDANTS

(1) Capacity in which Defendants are sued

130. I turn now to consider the allegation of negligence against the Defendants. It is said by the Claimant that the Defendants acted "irrationally". I use this as shorthand, as did the parties, to describe conduct falling short of the standard required by law of professionals or directors in the position of the Defendants. The First Defendant, Mr Cowling, is sued both qua director of the Company and qua agent acting for the Company as a partner in MCL. The Second Defendant, Mr Lawrence, is sued only as agent of MCL. In the text below, I set out relevant legal principles and then I apply the law to the position of both Defendants. I set out certain findings of fact below but I have also relied on the findings in Section C above.

(2) Relevant legal principles

a) The scope of the duty

131. Both Defendants are sued in their capacity as agents in MCL advising and acting for the Company. Professional surveyors and valuers owe duties of care to their clients. The duty is to use reasonable skill and care. In an appropriate case where the client instructs a surveyor or a valuer, that professional will owe duties even if the service is provided gratuitously. The authors of Clerk & Lindsell on Torts (20^th Edition) paragraph 10-154 thus say: "…as with doctors and lawyers, there is no doubt that a surveyor or valuer owes a duty of care to his paying client in both contract and tort; this is a matter of some little importance, particularly for limitation or interest purposes. There would equally seem to be no reason in principle why a surveyor should not be liable in tort to a client for whom he provides services gratuitously". In my view, this latter observation has particular weight where the professional provides gratuitous or "speculative" advice or services to a client in the hope or expectation that, in so doing, a remunerated instruction might or will follow in due course.
132. In this case, Mr Cowling is also sued in his capacity as a director of the Company. The facts of the claim predate the Companies Act 2006 (which came into force on 1^st October 2007) and hence the duty is one defined in terms of pre-existing common law. Though I add that I would have arrived at no different conclusion had I applied the statutory test in the 2006 Act which is said to be a codification of the common law rules and equitable principles.
133. As a director, Mr Cowling was required to act to the standard of a reasonable competent company director having the knowledge and experience which he possessed. In Re City Equitable Fire Insurance Co [1925] Ch 407 at pp.427-429 Romer J in his seminal observations upon this topic stated:

"In order, therefore, to ascertain the duties that a person appointed to the board of an established company undertakes to perform, it is necessary to consider not only the nature of the company's business, but also the manner in which the work of the company is in fact distributed between the directors and the other officials of the company, provided always that this distribution is a reasonable one in the circumstances, and is not inconsistent with any express provisions of the articles of association. In discharging the duties of his position thus ascertained the director must, of course, act honestly; but he must also exercise some degree of both skill and diligence. To the question of what is the particular degree of skill and diligence required of him, the authorities do not, I think, give any clear answer. It has been laid down that so long as a director acts honestly he cannot be made responsible in damages unless guilty of gross or culpable negligence in a business sense but as pointed out by Neville J in Re Brazilian Rubber Plantations and Estates Ltd…one cannot say whether the man has been guilty of negligence, gross or otherwise, unless one can determine what is the extent of the duty which is alleged to have neglected. For myself, I confess to feeling some difficulty in understanding the difference between negligence and gross negligence, except in so far as the expressions are used for the purpose of drawing a distinction between the duty that is owed in one case and the duty that is owed in another. If two men owe the same duty to a third person, and neglect to perform that duty, they are both guilty of negligence, and it is not altogether easy to understand how one can be guilty of gross negligence and the other of negligence only. But if it be said that of two men one is liable to a third person for gross negligence, and the other is liable for mere negligence, this, I think, means no more than that the duties of the two men are different. The one owes a duty to take a greater degree of care than does the other:…If, therefore, a director is only liable for gross or culpable negligence, this means that he does not owe a duty to his company, to take all possible care. It is some degree of care less than that. The care that he is bound to take is described by Neville J in the case referred to above as "reasonable care" to be measured by the care and ordinary man might be expected to take in the circumstances on his own behalf."

134. Later Romer J added various caveats and general propositions (ibid pp 428, 429). First, he recorded that the director need not exhibit in the performance of his duty a greater degree of skill than may reasonably be expected from a person of his knowledge and experience and he is not liable for "mere errors of judgment". Secondly, a director was not bound to give continuous attention to the affairs of his company. His duties may be of an intermittent nature to be performed at periodic board meetings and at meetings of any committee of the board on which he happens to be placed but he is not bound to attend all such meetings though he ought to attend whenever in the circumstances he is reasonably able to do so. Thirdly, in respect of all duties that may properly be left to some other official, the director is in the absence of grounds for suspicion justified in trusting that person to perform such duties honestly.

b) The relevance of contract

135. Where the person alleged to have been negligent is acting under the terms of a contract then it is important to determine the exact scope of the terms of engagement. This is, not least, because a term is implied into a contract that the professional will exercise reasonable skill and care in carrying out his instruction: See Clerk & Lindsell (ibid) paragraph 10-163. For illustration, there is clearly a difference between a surveyor or valuer who is instructed to conduct a valuation upon the basis of a limited survey and one who is instructed to provide a valuation following a full structural survey.
136. The Claimant alleges that the Defendants qua advisors to the Company failed properly to advise on the merits of a conditional sale and wrongly adhered to the strict limit in the Letter of Instruction to market the Site on the basis of unconditional use only. The Claimant cites the judgment of the High Court of Ireland in McMullen v Farrell [1993] 1 IR 123 at pp.142-143 for the proposition that blind adherence to instructions is not always a defence. For reasons that I set out below nothing turns upon this point, even assuming it to be correct. In that case the plaintiff held lands under a lease executed in 1972. The lease incorporated restrictive covenants in relation to user and alienation. In 1977 disagreements arose between the plaintiff and his landlord. In 1978 the plaintiff decided to sell his interest in the property. The landlord, however, indicated that he would withhold consent to any proposed sale or change of user. The plaintiff instructed solicitors to advise upon the position adopted by the landlord and upon other matters. The solicitors provided advice from 1977 until the property was finally sold in 1987. The land in question fell within the scope of legislation which came into force in 1980 which stipulated that restrictive covenants, such as those contained in the lease, were deemed to be subject to the proviso that the consent of the landlord for change of user or to alienation could not unreasonably be withheld. The solicitors failed to advise the plaintiff, following the coming into force of the 1980 legislation, of the effect of the new Act upon the covenants. The defendant's solicitors argued, in defending the claim for negligence, that they were not obliged to consider every aspect of the client's affairs but simply to act upon his instructions. In ruling upon this issue Barron J held as follows:

"…I agree that a solicitor is not obliged to consider every aspect of his client's affairs because he is asked for advice on a particular matter. The nature of the obligation is dependent on the terms of the contract between him and his client, which in turn depends upon for what matters his advice was sought.

A solicitor cannot in my view fulfil his obligations to his client merely by carrying out what he is instructed to do. This is to ignore the essential element of any contract involving professional care or advice. The professional person is consulted by the client for the very reason that he has specialist or professional skill and knowledge. He cannot abrogate his duty to use that skill or knowledge. To follow instructions blindly is to turn himself into a machine. In my view a solicitor when consulted by a client has an obligation to consider not only what the client wishes him to do, but also the legal implications of the facts which the client brings to his attention. If necessary, he must follow up these facts to ensure that he appreciates the real problem with which he is being asked to deal. When he is sure that he is clear as to the way forward, then he advises his client accordingly. In most cases, perhaps, this will involve doing what the client wants. Where a client has been involved in a road traffic accident, he wants to know whether he can recover damages. It is sufficient for a solicitor, having been given the facts and been satisfied that it is an appropriate case to sue, to indicate to his client that he will issue proceedings. Even in such a case, where the cause of action is weak, for example, and the client is a person of means, he cannot just issue proceedings. His client is entitled to advice as to the wisdom of so proceeding.

In more complicated cases, the duties of the solicitor are also more complex. If his opinion corresponds with what he is asked to do, then there is no problem. When it does not, he must advise his client of his views and all reasonable approaches to the problem. The solicitor then acts on the basis of the instruction which he receives in the light of these advices. It is probably better that the solicitor's advice should be in writing, but that is a matter for him. In other words, as part of his duty to his client, a solicitor is obliged to exercise his professional skill and judgement in the interests of his client. The extent of this particular obligation is dependent on the nature of the case presented to him."

The Claimant also contend in the present case that where a professional assumes responsibility beyond the limitations contained in contract then they may, thereby, assume responsibility in both tort and contract which extends beyond the strict language of the instruction: See Holt v Payne Skillington (1995) 77 BLR 51 at pp.71-74. Jackson & Powell on Professional Liability (7^th Edition) 2-118.

137. For their part the Defendants cite Bowstead & Reynolds on Agency (19^th Edition) Chapter 6 at paragraph 6.003. There the authors summarise case law emphasising that an agent must adhere strictly to the terms he has agreed to "even if the principal's instructions are foolhardy". The authors suggest that there may arise a duty to "warn and advise but if the advice is ignored the agent is bound to perform the terms of his agency". The parties in the present case thus differ in the extent to which the limitations in the agreement (the Letter of Instructions) affected the Defendants tortious duties. In the event, this debate is irrelevant given my findings of fact which exonerate the Defendants howsoever the agreement is construed.

c) Being wise in hindsight

138. When determining whether a professional man is negligent it is important to focus upon the facts which prevailed at the time of the relevant decision(s). In this case, the critical points in time are when the Letter of Instruction was given in October 2004 and the period up until exchange of contracts in September 2005. The issue is whether the professional acted negligently in the prevailing circumstances. No professional is impressed with prescience and cannot be criticised for failing to take account of future, unforeseeable, events.

(3) The position of the First Defendant (Mr Cowling)

139. I turn to consider the application of the law to the position of the First Defendant both in his capacity as agent of the Company (by virtue of his partnership in MCL) and in his capacity as director of the Company.
140. I have set out conclusions on the facts in Section [C] above and I do not repeat those findings here. I summarise below my conclusions on this issue and make additional fact findings as appropriate.

a) The allegation that Mr Cowling failed to obtain authority from the Board

141. It is alleged that Mr Cowling failed to obtain authority from the Board for the restrictions contained in the Letter of Instructions and/or for the sale of the Site to Earlplace. I have addressed this latter issue at paragraphs [126-127] above. I am quite clear that either the directors were fully informed and gave consent and/or, in any event, they had conferred upon Mr Cowling authority to act in relation to the sale on their behalf. I do not accept that they can contend that he acted without authority.
142. In relation to the instruction of MCL, I take the same position. I address this briefly. There are 3 other directors who were on the board at the relevant point in time: Mr Adams; Mr Robinson; and, Ms Lewington.
143. As to Mr Adams, he has not given evidence, so does not challenge Mr Cowling's evidence that he obtained Board authority.
144. As to Mr Robinson, in his Witness Statement, he recorded that offers to buy the site were handled by Mr Cowling alone and he reported back to the Board on progress. He also accepted that Mr Cowling dealt with commercial matters such as the Prologis agreement on behalf of the Board. He also accepted in evidence that he was not a property expert and I have no doubt that he did in fact rely upon Mr Cowling's skill and knowledge in property matters. He accepted, though he could not recall specific details, that he periodically met with Mr Cowling to discuss the Company's affairs and that their discussions would cover issues relating to the sale of the Site. Mr Robinson did not attend all Board Meetings. With specific regard to the appointment of MCL Mr Robinson, after some initial doubt, accepted that he knew of MCL's appointment and hence of Mr Lawrence's involvement. The following question was put to Mr Robinson: "Q. Yes, the simple point is that you as did the Board ratified or approved the appointment of MCL on the terms that they were appointed? A. Right, that's fine". Mr Robinson is recorded as having attended the Board meeting of 8^th February 2005 (see paragraphs [121-122] above) when the report of MCL, via Mr Lawrence, was received and discussed and when the Board expressly authorised Mr Cowling to negotiate the release of the Company from the Prologis agreement. There is not a hint of any director being unhappy or concerned at the manner in which the sale by MCL was being conducted.
145. As to Ms Lewington, she says that she had left the employ of the Company by the time any of these events occurred, albeit that she remained a director and Company Secretary. I have referred to her evidence at paragraph [39] above and I have already addressed her position in relation to the MCL instructions at paragraphs [126, 127] above. In the event of a conflict I prefer the evidence of Mr Cowling. In any event, she is recorded as having attended the Board meeting of 8^th February 2005, during which MCL advised on the offers generated by its marketing exercise and which post-dates the day upon which she says she left the company which itself casts doubt upon the accuracy of her memory. I do not accept Ms Lewington's statement that she was not at that meeting. I have no reason to disbelieve the record and no credible or sustainable argument can be advanced that it was fabricated.
146. Insofar as it is suggested that the limitations in the Letter of Instruction to existing use and unconditional offers was unauthorised there are 2 answers to this: either (a) Ms Lewington knew and consented or (b) Ms Lewington had by her conduct over a lengthy period delegated authority to Mr Cowling to conduct the sale on her behalf.
147. In my judgment, the fact that Mr Cowling obtained the authority of his fellow directors for the acts and omissions now said to be negligent, is relevant. Mr Cowling was not acting on a frolic of his own. On the contrary, he acted with the Board's delegated authority and express agreement and he acted in good faith.

b) The alleged irrationality in not forcing Prologis to pursue its agreement with the Company

148. I have set out my conclusions on the evidence relating to this at, inter alia, paragraphs [67-69 and 78-83] above. The Wollaston planning application refusal in June 2004 (see paragraphs [103-105] above) had a substantial and negative impact upon Prologis and its willingness to proceed. Mr Cowling was cross examined on the impact this refusal exerted upon the expectations of potential purchasers that they would be able to obtain permission to change use away from a cattle market. Mr Cowling considered that the refusal was a "game changer" and I accept this to be a rational conclusion. He believed that NBC was nigh on impossible to budge and that it had been successfully influenced by the "political" pressure from the farmers' contingent who, of course, had themselves pursued a "spoiler" application with success in late 2002/early 2003 (see paragraphs [73, 74] above). He recognised that in theory a refusal by NBC to grant permission could be appealed and that on an appeal a more objective and less emotive response could be expected but he also recognised that, first, an appeal could and probably would have taken up to 18 months and that, in any event, the outcome could not be guaranteed. He was of the view that the Company simply did not have the time or financial resources to conduct an appeal.
149. Prologis thus had genuine and substantial reasons for forming the view that the prospects of obtaining consent for a change of use for the Site in isolation and as part of a wider redevelopment were very difficult. The evidence I have referred to, which shows the highly adverse view Mr Springett and EP adopted towards Prologis, confirms the pessimism of Prologis. In short the Prologis deal was going nowhere. I have also recorded that in February 2005 the Board gave Mr Cowling express authority to negotiate the release of the Prologis Agreement in the light of what then seemed to be better unconditional offers. In those circumstances the suggestion by the Claimant that Mr Cowling acted negligently in not forcing Prologis to proceed with the agreement lacks realism. The Board collectively discussed the issue and authorised Mr Cowling to act as he did. At the resultant point the Company had neither the financial resources nor the human resources, nor the time to pursue expensive, protracted and complex litigation in respect of which a positive practical outcome was very far from probable.

c) The alleged irrationality in failing to obtain advice in relation to the sale marketing of the Site

150. The Claimant alleges that Mr Cowling should have obtained detailed planning and marketing advice and that had he done so any competent advisor would have advised that the Site should be marketed on a basis which included conditional offers. I reject this submission. I have real difficulty in seeing precisely what additional planning, marketing or valuation advice Mr Cowling could have brought to the table had it been sought which would have made a material difference. Moreover, in my judgment a competent advisor who was fully briefed by Mr Cowling would in no way have criticised Mr Cowling's judgment. First, in relation to planning and the position of the planning authority, Mr Cowling was aware of the position of NBC and the fact that they were hostile to any change of use on the Site which moved away from that of a cattle auction. He was aware that WNDC, as successor to NBC, did not adopt any different position; a stance confirmed subsequently by the perception of Mr Brodie when writing to Mr Sawbridge who commented (see paragraph [99] above) that Mr Keith Barwell had it in mind to "sort out" Andrew Cowling in relation to the cattle market and that he (i.e. Mr Barwell) could not see why there was a need to build any new facility when a perfectly good one already existed. No third-party adviser would have had better intelligence than Mr Cowling in relation to the views of planning authorities. Secondly, as to the suggestion that a third party adviser would have given better advice in relation to the formal planning process, whilst it is true that Mr Cowling is not a planning specialist he is nonetheless well versed in planning practice. He had, moreover, first hand experience of the planning process as it actually applied having been instructed on the appeal in relation to the Wollaston unsuccessful planning application (see paragraph [105] above). Further, he was well aware of the amount of time that it would take to complete a planning application and then an appeal. The evidence suggested that the time required to prepare an application, submit it and await a decision and then appeal that decision to an ultimate decision could be circa 14-18 months. Expert advice was not required to tell Mr Cowling this. Mr Stephenson, the Claimant's expert, took issue with the view, on the scope for permission to change use, persistently expressed by NBC (and in particular Mr David Alderson) and later WDNC. He was of the view that they incorrectly applied the law. But, once again, this would be not have been a surprise to Mr Cowling who had been involved in the planning process and knew what the realpolitik was. To be told that the planning authority was wrong meant only that appeals were a certainty. And he knew this. Thirdly, in relation to the suggestion that an expert might have provided better valuation advice, at this juncture Mr Cowling had spent circa two years seeking a purchaser for the Site and had received a range of offers for this particular land from potential purchasers who valued the land, and its development value, based on market intelligence at the time. This was, in my view, perfectly good evidence upon which to form an assessment of how to market the Site and whether to seek conditional or unconditional offers. In particular the best possible conditional offer that might possibly have been achieved, vis Prologis, had collapsed upon the basis of frustration experienced by Prologis with the stance adopted by EP and the planning authorities (NBC). In relation to valuations, the experts have provided additional comparables. These are interesting and suggest that in respect of other pieces of land where there is development value, higher per acre prices have been realised. But the Site in issue in this case had very particular characteristics and complexities and Mr Cowling was well aware of these. None of the comparables exhibited quite so many moving and interconnected parts all of which had to be in perfect synchronicity for the full development value to be realisable, as did the Site. Once again I cannot see anything which even the most comprehensive expert valuer might have said which would have made Mr Cowling's task in 2004/2005 of assessing the basis upon which and the right price to sell the Site any the easier. Indeed, at that time Mr Cowling also had the benefit of advice on valuation from Mr Lawrence who had greater experience than did Mr Cowling and Mr Lawrence expressed a view on valuation in 2003 which took account of comparables. In short, I have been unable to identify any specific piece of information, practice or intelligence that an expert third party could have provided that might have been so novel that it could or even might have exerted a material impact on Mr Cowling's decision making in 2004 or 2005. I am clear that the decision not to take advice was not negligent.

d) The alleged irrationality in failing to do a deal with EP to neutralise clawback

151. The Claimant alleges Mr Cowling acted irrationally in failing properly to exploit the "ransom" value which the Site possessed vis a vis EP (see paragraph [54] above). When deciding to focus upon unconditional offers, Mr Cowling took into account the overage or clawback obligation which meant that if a conditional agreement was pursued the Company would be liable to pay to EP a substantial portion of any consideration that was paid as a result of a successful planning change of use. This was a factor militating against seeking conditional offers. It was suggested by the Claimant's expert that the Company could have secured a stand alone agreement with EP which neutralised the clawback obligation prior to the marketing of the Site by using the "ransom" leverage which it held in relation to access to the Green Space Site. I consider this to be wholly unrealistic. In my judgment, there was minimal prospect of EP agreeing any form of stand alone agreement with the Company over clawback. And certainly even if they had been prepared to do this in principle, the time that would have been needed to negotiate such an agreement would have been far longer than Mr Cowling had available to him. He needed a quick sale; not one that became contingent upon a convoluted negotiation with EP. Indeed the subsequent correspondence between Mr Lawrence (for Earlplace) and EP which involved the DTZ analysis (see paragraphs [92-94] above) shows just how complex and contingent the possibility of EP ever coming to terms with the Company over "ransom" access would have been. Any deal which traded clawback away for access to the Green Space was inherently likely to arise only as part of a wider redevelopment, and not on a stand alone basis, and it is evident that Earlplace and EP were a very long way apart in negotiating positions. I reject the suggestion that it was irrational of Mr Cowling not to embark upon, or complete, those negotiations prior to marketing the site.

e) The alleged irrationality in marketing the Site on an unconditional basis only

152. The allegation that it was negligent to offer the site on an unconditional basis only, is the sum of many other allegations. This submission is based upon the incorrect assumption that the Company accepted only unconditional offers. It is not correct however to say that the offer was limited strictly to unconditional offers. The particulars make clear that the Company had a preference for unconditional offers (see paragraph [112] above) but unconditional offers were not precluded. Developers did not construe the offer as limited to unconditional offers only as the conditional Frontier offer was received and was put to the Board at its meeting on 8 February 2005. This particular conditional offer was, when analysed against other unconditional offers, less attractive when one took into account the clawback and associated risk. The Board had no hesitation in deciding upon a straightforward comparison of the bids (including the conditional ones) before it that the unconditional offers were superior. It is also right to conclude that the conditional offer was not rejected out of hand, as it might have been if the Company had been rigid in only being prepared to consider unconditional bids. Rather, it was assessed by Mr Lawrence in his Report to the Board on its own merits; it was considered by the Board on its relative merits; and it was then rejected on its merit. Hence, the only point remotely arguable that can be made was that had the particulars been drafted so as to leave greater leeway for conditional bids then, perhaps, a few more offers might have been proffered. But there are two answers to this. First, given that the Site had been marketed for about two years prior to October 2004 and conditional bids had failed, it is reasonable to suppose that there was no great appetite in the market place for conditional bids and no evidence was adduced at trial which suggests that there was in fact some large, untapped, reservoir of conditional bidders ready to pounce as of 2004/2005. Secondly, even if there was such a reservoir, this still does not mean that the decision to limit the marketing effort to one which focused upon unconditional bids was negligent. Mr Cowling had addressed himself to past experience and to the present needs of the Company for a quick deal and had formed a "view". It was, in my judgment, well within the margin of his "judgment" or "discretion" as a director and Chairman to decide to limit the bids in the considered expectation that this would lead to a more rapid resolution of the Company's dire financial position.

f) The position of minority shareholders and the farming community

153. I have set out the evidence on this at paragraphs [71-76] above. One of the ironies of this case is that the decision by Mr Cowling and the Board to limit the sale with a preference for unconditional offers on the basis of existing use was precisely what the famers and farming minority shareholders wanted. Had Mr Cowling marketed the Site inviting all offers of every type it is in my view inevitable, given the history, that it would have stimulated further rounds of high profile, disruptive, guerrilla tactics by the farmers to block the deal. It is entirely possible that in the face of such tactics putative developers or others could have been deterred altogether from bidding. Mr Cowling took this into consideration and in my judgment he was perfectly entitled to do so.

g) The alleged irrationality in failing to resist Bank pressure or negotiate further concessions from the Bank

154. The Claimant has submitted that Mr Cowling acted irrationally in failing, in effect, to stand up to the Bank and by failing to negotiate extensions of loan facilities so as to buy time for a conditional offer to be accepted and to bear fruit. The Claimant's experts did not, however, address in their reports the financial position of the Company in relation to its Bank. I have set out my conclusions on this at paragraphs [58-66] above. Mr Stephenson accepted that this was a relevant consideration but he said that whilst he knew that the Company had need for about £2m in revenue he had not seen relevant correspondence between the Company and the Bank and he was not aware of the pressure the Company was under. He did not know, for instance, of the level of indebtedness of the Company to the Bank; he did not know that the Company had to pay significant quarterly interest payments out of its current account which it had to keep in credit. In short, in October 2004, the Company was under ever increasing financial stress. It was one factor, amongst others, which Mr Cowling was entitled to take into account when deciding to limit the Letter of Instruction and the particulars in order to endeavour to achieve a quick and less complicated sale. He also took into account when considering the Earlplace offer that the Bank pressure significantly increased in the summer of 2005. The gravamen of Mr Cowling's evidence was that, in his judgment, the Company had run out of options. That was his genuinely held belief premised on cogent evidence. He said: "Irrespective of what advice had been received, the company was in a position where it had to effect a sale. It could not meet its obligation". That was a reasonable stance to adopt. It is impossible to predict what the Bank would in fact have done if the Earlplace agreement had not been concluded in September 2005 but Mr Cowling was, in my judgment, entitled to come to the view that there was a serious risk that the Bank would call in its loans, place the Company into administration or liquidation, and seek to have the Site sold for a knock down price which might cover the Bank's debt but which would not yield a return which would leave anything for shareholders.

h) The alleged irrationality of selling the Site to Earlplace for £2.25m

155. On the second day of giving evidence, Mr Cowling said of his decision to accept the Earlplace offer in September 2005: "…the Site is only worth what someone is prepared to pay for it", and this axiomatic statement about valuation encapsulates the dilemma facing Mr Cowling and his Board in late 2005. It highlights an important point which is that when a court comes to review the decision of a professional the temptation to be wise with the benefit of hindsight must be resisted. The Court is not seeking to identify what, in its view, some 9 years on, would have then been the optimal decision years earlier. It is possible that having heard expert evidence and engaged in an almost archaeological excavation of the documents a judge might be tempted to disagree with the professional and conclude that he might – indeed – should have done things differently. But this is not the task of the Court. The Court is there to decide whether in all the circumstances which prevailed at the time the decision of the professional was a reasonable one.
156. So far as Mr Cowling was concerned, he first heard about Earlplace on or about 30^th August 2005. At this time there were no alternative offers on the table. He had to keep the Bank at bay and until the offer emerged he had no means of paying the quarterly interest charges. He entered into an exclusivity, negotiating lock out agreement and was paid £20,000 for this. This sum enabled the Company to pay the interest charges then owed to the Bank and avoid it being in breach of its banking covenants. The consideration of £2.25m enabled the Company to repay bank debts and there was something left over for shareholders.
157. The consideration was within the range of reasonable valuations for the site on an unconditional basis. It was significantly above what the farmers' consortium was prepared to pay: See the valuation evidence at paragraphs [114-123] above. Insofar as there is any doubt about the matter, Kilmartin were not on the scene at this time and the evidence made clear that the price they paid, of £5m, was accepted by all as at the extreme outer most reach of, or even beyond, the range of a sensible price.

i) Conclusion

158. For all of these reasons I am clear that Mr Cowling's conduct was reasonable and he was not negligent either in his capacity as director of the Company or qua agent as a partner in MCL and that the Claimant's case in negligence fails in relation to him.

(4) Alternate analysis of the position of the First Defendant: Power of court to grant relief under Section 1157 Companies Act 1986

159. I turn to consider an alternative argument advanced by Mr Walker on behalf of Mr Cowling. The Court has a broad discretion to relieve a company director of liability for negligence, default, breach of duty or breach of trust. The power was incorporated in Section 727 Companies Act 1985. It was subsequently repealed and substantially repeated in Section 1157 Companies Act 2006. In my view the relevant statutory provision to apply is the power in the 2006 Act because it is the power in this statute which applies as of the date of the invitation by Mr Walker to me to exercise the power. Mr Walker submitted that were I to conclude that Mr Cowling was in breach of duty then since he had acted honestly and reasonably at all times, it was an appropriate exercise of my power to grant relief in his favour. As a result of my finding no breach of tortious duty by Mr Cowling it is not strictly necessary for me to address the statutory power to grant relief. However, given that the matter was argued before me, I propose to set out my findings which necessarily operate in the alternative. Section 1157(1) provides as follows:

"1157 Power of court to grant relief in certain cases

(1) If in proceedings for negligence, default, breach of duty or breach of trust against –

a. An officer of a company, or

b. A person employed by a company as auditor (whether he is or is not an officer of the company),

it appears to the court hearing the case that the officer or person is or may be liable but that he acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused, the court may relieve him, either wholly or in part, from his liability on such terms as it thinks fit…"

160. There is little authority to guide the construction of Section 1157. In Coleman Taymoar v Oakes [2001] 2 BLC 749 it was held that the power to grant relief (under the old provision) applied to an account as well as to damages. In this case the issue is whether Mr Cowling should be liable for his actions qua director for negligence.
161. In Re D'Jan of London Ltd [1993] BCC 646 Hoffmann LJ, sitting as an additional judge of the Chancery Division, made observations about the scope of the statutory provision in the context of a summons under Section 212 Insolvency Act 1986 by a liquidator against a former officer of the company. The liquidator alleged that the respondent, Mr D'Jan, was negligent in completing and signing a proposal form for fire insurance with the insurers. In consequence the insurers repudiated liability for a fire at the company's premises which destroyed valuable stock. The liquidator brought proceedings for the benefit of the unsecured creditors. Lord Justice Hoffmann found that the respondent was negligent in the manner in which he completed the relevant form and that he was therefore in breach of his duty to the company. He concluded that, in principle, the respondent was liable to compensate the company for the breach of duty. He turned to Section 727 Companies Act 1985. He stated that this:

"…gives the court a discretionary power to relieve a director wholly or in part from liability for breaches of duty, including negligence, if the court considers that he acted honestly and reasonably and ought fairly to be excused. It may seem odd that the person found to have been guilty of negligence, which involves failing to take reasonable care, can ever satisfy a court that he acted reasonably. Nevertheless, the section clearly contemplates that he may do so and it follows that conduct may be reasonable for the purposes of section 727 despite amounting to lack of reasonable care at common law."

162. He held that the fact that the respondent was a 99% shareholder in the company was relevant to the exercise of his discretion:

"it may be reasonable to take a risk in relation to your own money which would be unreasonable in relation to someone else's. And although for the purposes of the law of negligence the company is a separate entity to which Mr D'Jan owes a duty of care which cannot vary according to the number of shares he owns, I think that the economic realities of the case can be taken into account in exercising the discretion under section 727. His breach of duty in failing to read the form before signing was not gross. It was the kind of thing which could happen to any busy man, although, as I have said this is not enough to excuse it. But I think it is also relevant that in 1986, with the company solvent and indeed prosperous, the only persons whose interests he was foreseeably putting at risk by not reading the form were himself and his wife. Mr D'Jan personally acted honestly. For the purposes of section 727 I think he acted reasonably and I think he ought fairly to be excused for some, though not all, of the liability which he would otherwise have incurred.

163. In my judgment, the following facts and matters are relevant to the conclusion that I have arrived which is that it would have been appropriate to relieve Mr Cowling from liability for his negligence had I found that his conduct was negligent.
164. Good faith and honesty: It follows from the findings that I have made throughout this judgment that Mr Cowling acted at all material times honestly and in good faith. He was in the midst of a highly complex and politically sensitive issue. He did his best. This gateway condition for the exercise of the power is satisfied.
165. Claimant's allegations: I take into account the manner in which the claim has been pursued including the fact that allegations of fraud and breach of fiduciary duty were levelled against Mr Cowling. The fraud allegations were dropped shortly before trial and the allegation of breach of fiduciary duty was abandoned in the course of the Claimant's closing submissions. Nonetheless, the litigation was prolonged and complicated by these assertions and put Mr Cowling under considerable stress over a lengthy period of time. This is a matter which I am able to take into account in the exercise of my discretion. The sole remaining claim based on Mr Cowling's conduct as a director is for negligence. There is no equivalent power to provide relief to Mr Cowling in his capacity as an agent. Section 10 Partnership Act 1890 is the nearest equivalent but it provides a different and narrower escape hatch. I address this below (paragraphs [268-277]).
166. Board approval: I have found that Mr Cowling obtained Board approval for the decisions now said to be negligent and this is also a material factor which is relevant, particularly in the unusual circumstances of this case where the Claimant is the assignee of claims that the Company hitherto owned and where the principal witnesses for the Claimant are persons who approved of the decisions now objected to. I also take into account the fact that the motivation behind these claims against Mr Cowling seems to have included a misguided belief that Mr Cowling benefited or connived with Mr Lawrence to defraud the shareholders: See my observations on the evidence of Ms Lewington at paragraph [39] above. Two of the directors giving evidence to support the allegation of negligence approved the decisions they now decry. It would in my view lead to a most unreasonable result if Mr Cowling were held to be liable in such circumstances.
167. Severity of breach: In the exercise of discretion under Section 1157 it is necessary to measure the severity of the breach as found as against broader tenets of honesty and reasonableness. It follows that if the primary finding can be categorised as "egregious" or "gross" then it is less likely to be forgivable, than if it is described as "technical" or "marginal". In the present case had I, ex hypothesi, found Mr Cowling to be negligent it would in my view have been a marginal finding, and certainly not a "gross" breach.
168. Economic reality: I consider that I should also take into account economic reality. The Defendant was a 41% shareholder in the Company. It was in his interests to secure the best sale of the Site possible and he stood to lose most out of all of the other shareholders if the sale was at an undervalue. I do not give this the weight that Hoffmann LJ gave to the fact that the Respondent before him in Re D'Jan of London Ltd (see paragraph 161 above) was a 99% shareholder. The other 1% being held by the Respondent's wife. Nonetheless, it at least has some value in the weighing process.
169. The probability of material loss being caused to the Company: I also take into account that the loss to the Company from any finding of breach would have been highly speculative. It has not been necessary for me to address questions of causation or damage but I formed the view in the course of the trial that even if the Site had been more broadly marketed in accordance with the Claimant's analysis, it is most unlikely that it would have generated either more or better offers of either a conditional or unconditional nature. It must be borne in mind, in this regard, that the Site had been marketed for about 2 years prior to October 2004 and this had not generated any conditional or unconditional offer that had proven viable. Further, in August 2005 Mr Cowling instructed Mr Lawrence to re-market the Site and this also did not generate new offers of any materiality.
170. Conclusion: Mr Walker made the following closing submission on behalf of Mr Cowling: "[this] has been quite a battle for D1, and a very public and stressful one at that. D1 has strived at all times to seek the best return for shareholders, of which he, of course, is one. If the court finds that he failed in that endeavour, it was not through want of honest effort undertaken in difficult circumstances. In the circumstances, he ought to be relieved of all liability". I agree.

(5) The position of the Second Defendant (Mr Lawrence)

171. In relation to Mr Lawrence the Claimant has not sought materially to advance a case which differs from that against Mr Cowling. Prima facie, this is because MCL was given a defined and limited role under the Letter of Instruction and Mr Cowling drafted the Letter of Instruction specifically including its limitations. If Mr Cowling is not negligent, it is hard to imagine how, in a practical sense, Mr Lawrence could be guilty of negligence to the Company. I therefore propose to summarise my conclusions on this issue relatively briefly and to address only those points which relate specifically to Mr Lawrence.
172. First, the starting point is that Mr Lawrence was given clear instructions by the Company in the Letter of Instruction. For the reasons of law set out in paragraphs [135-137] above it is important to measure an agent's conduct by reference to the terms of their appointment. On a proper interpretation of those Instructions I find MCL (and hence Mr Lawrence) was instructed only to act in respect of the marketing of the Site: See the second substantive paragraph of the Letter of Instruction at paragraph 108 above.
173. Secondly, MCL was not asked to advise on planning matters or on valuation or indeed to do anything other than market the Site on the stipulated restricted basis. The decision to impose the limitations was taken by Mr Cowling, with Board approval, and was predicated on the complex medley of reasons set out above. Mr Lawrence cannot be criticised for not challenging the limitations. He certainly had some knowledge of the background factors but the decision that mattered to impose the limitations was not his and there was nothing in the surrounding facts that indicated that he could or should step outside of his contractual limitations.
174. Thirdly, MCL (and hence Mr Lawrence) was not instructed nor expected to advise on commercial transactions that the Company was engaged in at the time, for example the Prologis agreement. Mr Cowling asked Mr Lawrence to assist Prologis in seeking to obtain planning change of use. He did so on behalf of the Company. He was not, in my judgment, acting for Prologis at this time. But this did not equip him to advise the Company on the way in which the Company should act viz a viz the Prologis agreement. Prologis formed its own view of the prospects of securing planning permission for a change of use. Through Mr Alan Curtis they negotiated directly with Mr Cowling. Mr Cowling was aware of the complexities surrounding the position adopted by NBC and EP. If the criticism is that Mr Lawrence should have advised the Company to compel Prologis to continue with the agreement then, manifestly, this was not something that Mr Lawrence could have been expected to express a considered view upon. Mr Lawrence's instructions emanated from Mr Cowling, a professional surveyor with 30 years experience. There would have been no need to instruct Mr Lawrence to provide advice on matters Mr Cowling was well able to form his own judgment upon. In any event, for the reasons I have given above (see paragraphs [148 and 149] above), Mr Cowling would have acted perfectly sensibly in rejecting such advice had it been given.
175. Fourthly, I also bear in mind that Mr Lawrence in fact construed his instructions somewhat more broadly and generously than a rigid injunction to accept only unconditional offers. I have referred to the fact that he marketed the Site in the particulars upon the basis that there was a preference for unconditional offers but that conditional offers were not excluded. I have referred also to the fact that he put unconditional offer to the Board (the Frontier bid) and that he did not say to the Board that it should be rejected outright because it was conditional. On the contrary, he assessed its merits relative to the other unconditional offers that were made.
176. In conclusion Mr Lawrence did not act negligently. The Claimant's case fails in this regard. For the avoidance of doubt my conclusion on negligence is without prejudice to the different analysis relating to breach of fiduciary duty, to which I now turn.

E. BREACH OF FIDUCIARY DUTY BY FIRST AND SECOND DEFENDANTS

(1) Introduction

177. I deal with the issue of breach of fiduciary duty by, first, setting out the relevant legal principles, secondly, applying the principles to the position of the Second Defendant (Mr Lawrence) and, thirdly, applying the principles to the position of the First Defendant (Mr Cowling).

(2) Relevant legal principles

a) Basic principles

178. As a general proposition an agent occupies a fiduciary position vis a vis his principal: see Rosetti Marketing Limited v Diamond Sofa Co Limited [2012] EWCA Civ 1021; [2013] Bus LR 543 at [20]. As to the content of the duty the agent owes what Millett LJ in Bristol & West Building Society v Mothew [1998] Ch 1, 18A-B, called "the single-minded loyalty" to his principal so that he "must not place himself in a position where his duty and his interest may conflict". So, for example, it would, at least prima facie, be a breach of the agent's duty to act for principals who were in competition with each other: See to this effect Lord Browne-Wilkinson giving the judgment of the Privy Council in Kelly v Cooper [1993] AC 205, 214D.
179. By the same token an agent who acts for two sides of a transaction which his initial client has retained him to procure will be in breach of duty. In Hurstanger Limited v Wilson [2007] EWCA Civ 299; [2007] 1 WLR 2351 at [33] Tuckey LJ stated at:

"Certain things are clear. The Defendants retained the broker to act as their agent for a substantial fee. The contract of retainer contained the usual implied terms, but the relationship created was obviously a fiduciary one. As a fiduciary the agent was required to act loyally for the Defendants and not put himself into a position where he had a conflict of interest. Yet he agreed that he would be paid a commission by the other party to the transaction which his client had retained him to procure. By doing so he obviously put himself into a position where he had a conflict of interest. The Defendants were entitled to expect him to get them the best possible deal, but the broker's interest in obtaining a further commission for himself from the lender gave him an incentive to look for the lender who would give him the biggest commission".

The gravamen of the conflict arises out of the incentives which operate upon an agent who stands to be remunerated by both vendor and purchaser. This dictum has particular resonance on the facts of this case. It is of note that the RICS Manual of Estate Agency Law and Practice 2^nd Edition (April 2004) at B2.2.3 states in strong terms that acting for vendor and purchaser is a conflict of interest. See also by way of illustration Henry Smith & Sons v Muskett [1978] 1 EGLR 13.

b) The relevance of contract

180. The scope of any fiduciary duty will be affected by any relevant commercial contractual arrangement which gives rise to the fiduciary duty in the first place. In Hospital Products Limited v United States Surgical Corpn (1984) 156 CLR 41, 97 Mason J observed that where a fiduciary duty was said to arise out of a commercial contractual arrangement the duty "…if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them". That observation was cited by approval by Lewison LJ in Ranson v Customer Systems Plc [2012] IRLR 769 paragraphs 25-29. Both of those judgments were cited with approval by Lord Neuberger MR in Rosetti (ibid) at [21].

c) The duty to account

181. The duty to account does not arise simply because there has been some improper dealing with property "belonging" to the party to whom the fiduciary duty is owed: See Bhullar v Bhullar [2003] EWCA Civ 424 at [27] per Jonathan Parker LJ:

"…the relevant rule, which Lord Cranworth LC in Aberdeen Railway Co v Blaikie described as being "of universal application", and which Lord Herschell in Bray v Ford [1896] AC 4451, described as "inflexible", is that (to use Lord Cranworth's formulation) no fiduciary "shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which may possibly conflict, with the interests of those whom he is bound to protect"".

182. He went on to explain that where a fiduciary has exploited a commercial opportunity for his own benefit the relevant question is not whether the party to whom the duty is owed had some kind of beneficial interest in the opportunity. That was a formulistic and restrictive approach. Rather, the question was whether the fiduciary's exploitation of the opportunity was such as to attract the application of the rule: Bhullar (ibid) at para [28].
183. The trigger for the duty to account is based upon the actuality or the potential for a conflict of interest; it is the entering into an engagement "…which may possibly conflict with the interests of those to whom he is bound to protect". This is a phrase which according to Lord Upjohn in Phipps v Boardman [1967] 2 AC 46, 124:

"…requires consideration…It means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in conflict."

184. The rule prohibiting the making of secret profits out of a breach of a fiduciary duty is one which combines both flexibility and strictness. It is strict in that where a conflict arises there follows, inevitably, an obligation not to profit. It is flexible in that it arises in many different contexts and covers the relationships arising in the present case. In New Zealand Netherlands Society v Keys [1973] 1 WLR 1126 at [1129] Lord Wilberforce, in the Privy Council, stated:

"The obligation not to profit from a position of trust, or, as it is sometimes relevant to put it, not to allow a conflict to arise between interest and duty, is one of strictness. The strength, and indeed the severity, of the rule has recently been emphasised by the House of Lords in Phipps v Boardman…It retains its vigour in all jurisdictions where the principles of equity are applied. Naturally it has different applications in different contexts. It applies, in principle, whether the case is one of a trust, express or implied, of partnership, of directorship of a limited company, of principal and agent, or master and servant, but the precise scope of it must be moulded according to the nature of the relationship."

185. Recent jurisprudence indicates a slight softening of this strict rule which operates at the level of the fashioning of the account. For there to be an account there must be some sufficient nexus between the breach and the profits for which an account is ordered. Lewison J (as he then was) in Ultraframe (UK) Ltd v Gary Fielding et ors [2005] EWHC 1638 at paragraph 1588 summarised five governing principles:

"The governing principles are, in my judgment, these:

i) The fundamental rule is that a fiduciary must not make an unauthorised profit out of his fiduciary position;

ii) The fashioning of an account should not be allowed to operate as the unjust enrichment the claimant;

iii) The profits for which an account is ordered must bear a reasonable relationship to the breach of duty provide;

iv) It is important to establish exactly what has been acquired;

v) Subject to that, the fashioning of the account depends on the facts. In some cases it will be appropriate to order an account limited in time; or to order an account of all the profits of a business subject to all just allowances for the fiduciaries skill, labour and assumption of business risk. In some cases it may be appropriate to order the making of a payment representing the capital value of the advantage in question, either in place of or in addition to an account of profits".

d) Exceptions to the duty to account: Where acting for multiple principals is inherent to the business

186. There are two categories of case where an agent may act for two principals with ostensibly conflicting interests without being in breach of his fiduciary duty. The two types of case are as follows. First, an agent can act for two principals where the consent of both principals has been given on a fully informed basis. I deal with this in more detail below. The second type of case arises where it is inherent in the nature of the agent's business that it can act for numerous principals.
187. For example in Kelly v Cooper [1993] AC 205 it was held that the principal must have appreciated that it was in the nature of the agent's business as a residential estate agent to "act for numerous principals". Lord Browne-Wilkinson explained [214] that despite an ostensible conflict of interest residential agents "must be free to act for several competing principals otherwise they will be unable to perform their function". This paragraph was cited with approval by Lord Neuberger MR in Rosetti (ibid) at paragraph [23]. At paragraphs [25] and [26] he gave various indications as to the scope of this exception. In relation to residential estate agents he observed that they must have a large number of properties on their books in order to survive in business in particular as most agents operate in particular localities and "…it would be impossible for them to operate if the ordinary conflict rule applied". Further in relation to an argument that this principle should be extended to cover an agency for promoting the placing and selling of furniture in Great Britain he concluded that there were "…no obvious or inherent grounds for believing that the reasoning" should apply to such an agency. He added that the agent would have to establish a factual basis for any contention that the exception applied. At paragraph [27] he stated that he agreed with the observation in the 19^th Edition of Bowstead & Reynolds at paragraph 6-045, footnote 294, that because "estate agents…are only imperfectly agents…and are known to act for many principals" it was highly questionable whether the reasoning in Kelly v Cooper should be extended to other cases of agency "…at least in the absence of clear evidence to support such an extension". It is, in my view, clear that any argument promoting the extension of the inapplicability of the normal fiduciary obligations would need to be very cogently justified with strong evidence. I should add that in the present case no argument was advanced by the Defendants that agents acting for a vendor of commercial property (as opposed to residential property) could justify acting for purchasers in relation to a single piece of land by reference to the inherent characteristics of the business. I would not, in any event, have accepted such a submission, certainly not upon the facts of this case.

e) Exception to the duty to account: Informed consent and disclosure

188. In relation to informed consent the burden of proof of establishing such consent lies upon the agent: Rosetti (ibid) at [22]. The agent must establish that the principal said to have consented has been "fully" informed which means "…that the agent had made full disclosure to the principal". In Hurstanger (ibid) at [35] Tuckey LJ stated as follows:

"What amounts to sufficient disclosure for these purposes? Bowstead & Reynolds says, at para 6-057:

"Consent of the principal is not uncommon. But it must be positively shown. The burden of proving full disclosure lies on the agent and it is not sufficient for him merely to disclose that he has an interest or to make such statement as would put the principal on enquiry: nor is it a defence to prove that had he asked for permission it would have been given".

I think this is an accurate statement of the law. Whether there has been sufficient disclosure must depend upon the facts of each case given that the requirement is for the principal's informed consent to his agent acting with a potential conflict of interest".

In Hurstanger, Tuckey LJ also considered whether the agent's duty of disclosure extended to the amount of the commission he was to receive from the other party. He cited further with approval a passage from Bowstead & Reynolds (at para 6-084):

"where [the principal] leaves the agent to look to the other party for his remuneration or knows that he will receive something from the other party, he cannot object on the ground that he did not know the precise particulars of the amount paid. Such situations often occur in connection with usage and custom of trades and markets. Where no usage is involved, however, the principal's knowledge may be required to be more specific".

189. Of further significance is the endorsement given by the Court of Appeal (ibid at [37]) to then current guidelines provided by the Office of Fair Trading ("OFT") (November 1997) in relation to guidance for lenders and brokers as to the actual level of disclosure about commissions. This document, whilst not necessarily amounting to a prescriptive statement of law, to my mind makes eminently good common sense outside of the particular relationship of lender and broker there referred to in its analysis of the need to disclose the terms of retainers. Paragraph 20 of the OFT document advised brokers to do the following:

"20…disclose, both orally and in writing at an early stage, the existence and nature of any commission or other payment payable by the lender…They should explain clearly the implication of any such commission for the broker's role with regard to the borrower. This is in order that the borrower is clear as to any potential conflict of interest on the part of the broker. The [Office of Fair Trading] would encourage brokers to disclose the amount or likely amount or percentage figure of the commission, since such transparency will help to reassure borrowers that they are receiving appropriate advice from the broker. Where this is not done, the broker should disclose the factors which will determine its calculation, including whether it will be a percentage of the loan or a fixed sum, and whether it is intended to reflect the actual costs incurred by the broker in arranging the loan was linked to the total volume or value of the business brought to the lender over a given period. All such disclosures should be made in writing before the borrower enters into the loan agreement, and preferably before the loan application is submitted to the lender".

Tuckey LJ (at para [44]) concluded that on the facts of the case before him the agent should have informed the principal that a commission must be paid "…and its amount and done so in terms which made it clear that the Defendants were being asked to consent to this".

f) Failure to provide any disclosure at all

190. Where there has been no disclosure at all the agent will be deemed to have received "secret commission" which is a blatant breach of fiduciary duty. The payment or receipt of a secret commission is "…considered to be a form of bribe and is treated in the authorities as special category of fraud in which it is unnecessary to prove motive, inducement or loss up to the amount of the bribe": Hurstanger per Tuckey LJ at [38]. In such a case a principal has extensive remedies available to it against both the agent receiving the secret commission and the party paying that commission who is treated as a "briber". A principal can recover the amount of the bribe or damages for fraud when he can establish the amount of any actual loss sustained by entering into the transaction in respect of which the bribe was given: See Mahesan s/o Tahmbiah v Malaysia Government Offices Housing Co-operative Society [1979] AC 374, 383; Hurstanger (ibid) at [38]. Moreover any resulting transaction is voidable at the election of the principal who can rescind it provided counter-restitution can be made: Hurstanger (ibid) at [38].

g) Provision of partial disclosure

191. Where there has been partial or inadequate disclosure (as opposed to no disclosure at all) the available remedies may be different to those where no disclosure whatsoever has been given. In Shipway v Boardwood [1899] 1 QB 369, 373 Chitty LJ stated that "…the real evil is not the payment of money, but the secrecy attending it". In Hurstanger (ibid at [39]) the court questioned whether there was a halfway house between no disclosure at all, on the one hand, and sufficient disclosure to negate secrecy but nonetheless inadequate disclosure to say that the principal's informed consent had been given. The court could see no objection to the existence of such a halfway house upon the basis that in the case of partial or inadequate disclosure sufficient to negate secrecy it would be unfair to visit the agent and any third party involved with a finding of fraud and the severe consequences which attended upon such a finding. Simultaneously, it would be unfair to acquit them altogether for their involvement in what would still be a breach of fiduciary duty which lacked informed consent. The Court observed that there was no authority which shed light upon this question but nonetheless applied the distinction to the facts before them. It seems to me that in the light of this it is a distinction that I should consider in the present case.

h) Interest

192. In Hurstanger (ibid para [48]) Tuckey LJ applying this principle stated that the broker could similarly be required to account to the Defendant for the commission he received from the Claimant. He stated that interest would accrue as from the date upon which the unlawful commission was received (ibid [49]).

(i) Confidential information

193. Before turning to the facts, I address one other issue which is relevant to the present case, namely the use of confidential information. A fiduciary cannot use information that belongs to his principal for his own personal gain. This is not absolute and as a proposition needs to be addressed with some caution. This is because the position is substantially qualified once a person ceases to owe a fiduciary duty. The most common circumstance in which this issue arises is where a company director relinquishes his position and moves on and then wishes to use the fund of knowledge that he has hitherto acquired in his previous post for his future economic betterment.
194. The law has evolved to address these permutations of fact in relation to directors. However, there is no reason in principle why the principles as they apply to directors should not apply equally to relationships of principal/agent where a fiduciary obligation arises.
195. In the present case Mr Lawrence, at various points, acquired information of value to a putative purchaser of the Site. Some of this information was in the public domain, for instance certain planning information, policies and decisions. Other information such as the personal views of various planning officers or senior employees of EP, would have been difficult for some possible purchasers (such as Earlplace) to obtain and for this reason they might very well have seen a real commercial value in instructing and using an agent who possessed inside track knowledge and market intelligence and could use it to their advantage. A vendor knowing of this information may well wish to keep it from possible purchasers and will assume, and is entitled to assume, that a loyal agent acting on the vendor's behalf will not disclose it to a possible purchaser. I view such information as commercially confidential. Information of this type is confidential to the principal and is provided to the agent in circumstances where the provider or owner of the information assumed or believed that the agent was acting loyally for the principal and was receiving that information qua agent and would use it solely for the benefit of the principal.
196. In Hunter Kane Limited v Watkins [2002] EWHC 186 Mr Bernard Livesey QC, sitting as a Deputy Judge of the High Court, synthesised the principles set out in the judgment of Mr Justice Laurence Collins in CMS Dolphin Limited [2001] 2 BCLC 70 (in relation to the circumstances when a resigning director is still held to owe a fiduciary duty to his former employer company in relation to a maturing business opportunity). He identified 11 principles which later were described as "valuable" by Brooke LJ in Plus Group Limited v Pyke [2002] 2 BCL 201 at paragraph [71] and they were also later endorsed by Lord Justice Rix in Foster Bryant Surveying Limited v Bryant, and, Savernake Property Consultants Limited [2007] EWCA Civ 200.
197. I set out all 11 of the principles below (albeit that some are more related to the position of post resignation maturing opportunities):

"1. A director, while acting as such, has a fiduciary relationship with his Company. That is he has an obligation to deal towards it with loyalty, good faith and avoidance of the conflict of duty and self-interest.

2. A requirement to avoid a conflict of duty and self-interest means that a director is precluded from obtaining for himself, either secretly or without the informed approval of the Company, any property or business advantage either belonging to the Company or for which it has been negotiating, especially where the director or officer is a participant in the negotiations.

3. A director's power to resign from office is not a fiduciary power. He is entitled to resign even if his resignation might have a disastrous effect on the business or reputation of the Company.

4. A fiduciary relationship does not continue after the determination of the relationship which gives rise to it. After the relationship is determined the director is in general not under the continuing obligations which are a feature of the fiduciary relationship.

5. Acts done by the directors while the contract of employment subsists but which are preparatory to competition after it terminates are not necessarily in themselves a breach of the implied term as to loyalty and fidelity.

6. Directors, no less than employees, acquire a general fund of skill, knowledge and expertise in the course of their work, which is plainly in the public interest that they should be free to exploit it in a new position. After ceasing the relationship by resignation or otherwise a director is in general (and subject of course to any terms of the contract of employment) not prohibited from using his general fund of skill and knowledge, the 'stock in trade' of the knowledge he has acquired while a director, even including things such as business contacts and personal connections made as a result of his directorship.

7. A director is however precluded from acting in breach of the requirement at 2 above, even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself any maturing business opportunities sought by the Company and where it was his position within the Company rather than a fresh initiative that led him to the opportunity which he later acquired.

8. In considering whether an act of a director breaches the preceding principle the factors to take into account will include the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director's relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or indeed even private, the factor of time in the continuation of the fiduciary duty where the alleged breach occurs after termination of the relationship with the Company and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge.

9. The underlying basis of the liability of a director who exploits after his resignation a maturing business opportunity of the Company is that the opportunity is to be treated as if it were the property of the Company in relation to which the director had fiduciary duties. By seeking to exploit the opportunity after resignation he is appropriating for himself that property. He is just as accountable as a trustee who retires without properly accounting for trust property.

10. It follows that a director will not be in breach of the principle set out as point 7 above where either the Company's hope of obtaining the contract was not 'a maturing business opportunity' and it was not pursuing further orders nor where the director's resignation was not prompted or influenced by a wish to acquire the business for himself.

11. As regards breach of confidence, although while the contract of employment subsists a director or other employee may not use confidential information to the detriment of his employer, after it ceases the director/employee may compete and may use know-how acquired in the course of his employment (as distinct from trade secrets – although the distinction is sometimes difficult to apply in practice)."

198. Principle 11 makes clear that whilst still a director owing a fiduciary duty the director may not use confidential information which arises by virtue of his employ "to the detriment" of the employer. The same applies, a fortiori, in relation to the position of an agent who owes a duty to his principal during the pendency of the agency relationship. Once that relationship has come to end then, as Principle 6 makes clear, the agent is free to use his stock or fund of knowledge for his personal gain save insofar as it is used in relation to a "maturing" business opportunity such as is defined in Principle 7.
199. In any analysis it is hence critical to take as a first question the point in time at which the agent ceases to owe a duty to his principal because that governs whether the ordinary conflict rules apply or the somewhat ameliorated rules in relation to maturing opportunities apply.

(3) The position of the Second Defendant (Mr Lawrence)

200. I turn now to apply the above principles to the position of Mr Lawrence. In relation to the question whether Mr Lawrence is liable for breach of fiduciary duty there are a number of factual matters that need to be addressed. They are:

i) the date upon which Mr Lawrence ceased to owe a duty to the Company;

ii) the date upon which Mr Lawrence was first retained by Earlplace and the terms of his retainer;

iii) whether Mr Lawrence was in position of conflict;

iv) whether there was adequate disclosure; and,

v) conclusion

a) The date upon which Mr Lawrence ceased to owe a duty to the Company

201. The date upon which Mr Lawrence resigned from MCL is important because it is relevant to the date upon which Mr Lawrence's fiduciary duty to the Company ceased. In order to determine this particular issue, it is necessary to examine closely the actual facts and events as they unfolded and to form a view as to what those facts indicate about Mr Lawrence's ongoing relationship with the Company regardless of his position viz a viz MCL.
202. The position on this of Mr Lawrence and Mr Cowling advanced during the trial can be summarised as follows.
203. Mr Lawrence argued that he resigned from the MCL partnership on 4^th July 2005 and was free thereafter to exploit all opportunities without limit. He considered that this extended to seeking out clients who might purchase the Site. He says that the opportunity to act for Earlplace and his involvement in the sale of the Site to Earlplace all occurred after he had resigned from MCL and ceased to owe any duty to the Company. Mr Cowling in his Witness Statement says that Mr Lawrence first intimated a desire to leave the partnership in February 2005 and that in consequence he realised that he needed to take steps to find a new practice from which he could continue working. He discussed options with Mr Lawrence and they sought professional (non-legal) advice which was that the best option was for him and Mr Lawrence to sell the business of MCL allowing Mr Lawrence to retire from MCL and Mr Cowling to carry on practising in some new guise. Mr Cowling then commenced discussions with Carter Jonas, the national organisation of surveyors and estate agents. He explained that he and Mr Lawrence agreed that the proceeds of any sale would be split 50:50 between them. Mr Cowling prepared a statement of current instructions. Towards the end of May 2005 the basics of a sale to Carter Jonas were close to fruition. In his Witness Statement Mr Cowling stated that, following a meeting with a Mr Howarth of Carter Jonas on 4^th July 2005: "Neil and I left that meeting believing that everything was pretty much agreed. I was pretty confident that a deal would be struck. Neil was anxious to move on. We thereafter agreed that his involvement in MCL would cease". But negotiations proceeded slower than anticipated and in fact, it was only on 13^th September 2005 that the sale of the MCL business to Carter Jonas was completed. He also says that the Board was well aware of this and was content that Mr Lawrence would be free to pursue his own interests. In his witness statement and in oral evidence, Mr Cowling accepted that there were certain caveats to the proposition that Mr Lawrence was wholly released. He recognised, for instance, that the delay in the sale of the MCL business to Carter Jonas meant that "technically" the partnership did not end on 4^th July 2005.
204. For the reasons set out below whilst I accept that de facto the relationship between MCL and Mr Lawrence changed as from 4^th July 2005, I do not accept that Mr Lawrence ceased to owe a fiduciary duty to the Company as of that date. That duty ceased only on 23^rd September 2005 when the Company and Earlplace exchanged contracts for the sale of the Site. I record below chronologically the relevant evidence.
205. First, there is the evidence of Mr Lawrence himself as to the hurdles that he accepted had to be overcome before he would resign from MCL. He was, as of 4^th July 2005, well aware that he and Mr Cowling had to bring the partnership to an end before he could cease to be a partner. The point in time at which Mr Lawrence would leave the partnership was connected with the sale of MCL. Mr Lawrence in his Witness Statement describes the agreement that he had with Mr Cowling in the following terms:

"… we agreed that I would leave MCL once we had found a surveying company that was a suitable "fit" in terms of acquiring or merging with MCL and could offer Andrew the opportunity to continue practising as a chartered surveyor" (italics added).

206. When he reflected on this some years later (in the course of preparation for this trial) Mr Lawrence was of the view that it was completion of the due formalities of the sale to Carter Jonas that would trigger his cessation as a partner: See paragraphs [220, 221] below.
207. Next, on 26^th July 2005, some 3 weeks after he says he resigned from MCL, Mr Lawrence wrote to Peter Springett of EP stating that an employee of NBC had told him that Wrefords had not obtained planning consent and that his clients "haven't a chance" of using the auction centre site for anything other than a cattle market. He observed that his effort to have a constructive conversation with this official about "the bigger picture" had proven ineffectual. He sent the email using the MCL email address. The "client" was clearly the Company. Peter Springett replied on 2^nd August 2005 to Mr Lawrence, also at his MCL email address, stating that he had taken up the opportunity to move forward a comprehensive development scheme for the three Brackmills sites which included the Site, the D1 land and the Green Space with WNDC. He stated that the authority had expressed interest in looking further at the possibilities. He stated that he was awaiting a response from the Development Corporation but anticipated that this would be positive and he asked whether the cattle market was still available as "…we would need to factor in the opportunity to safeguard the Cattle Market function". It is thus apparent that (i) Mr Lawrence was communicating with EP on behalf of MCL and the Company in late July 2005; and (ii) just days later, Mr Springett of EP believed that he was dealing with Mr Lawrence still acting on behalf, via MCL, of the Company. Mr Cowling said in evidence that he was away on holiday at this time and was unaware of the exchange. He speculated that he might have learned about it at the end of August. He understood, based upon this exchange, that Mr Lawrence was acting for the Company.
208. On 10^th August 2005, Mr Lawrence wrote on MCL headed notepaper to an agent whom he understood was acting for Brownhills Leisure Group in respect of their search for locations along the M1 corridor. He explained that he acted for a client that owned a site located in Northampton which he considered might be of interest to the agent's client. It is clear from the context that the client that owned the site was the Company. He expressly represented that he had specific instructions from the Company as to whom he should be approaching and that the Company would accept an offer on a freehold or leasehold basis. He said that "…he has been instructed to approach a select number of alternative named occupiers with this opportunity on a confidential basis". He also said: "My clients will look at disposing of the site on either a freehold or leasehold basis". As of 10^th August 2005, Mr Lawrence was explicitly holding himself out as acting for the Company and more specifically, as having express instructions from the Company to approach selected potential purchasers to seek freehold and/or leasehold offers. There was some confusion about this communication since it emanated from Mr Lawrence's personal email (not that of MCL) but the email itself was in the form of a letter on MCL headed note paper. But quite irrespective of precisely how this came about, it is clear that the missive was sent by Mr Lawrence purporting to acting for the Company with its express authority and instructions. I say "purporting" because in oral evidence Mr Lawrence explained that in fact he was not authorised by the Company to send this letter (upon the basis that he had hitherto resigned from MCL on 4^th July 2005) and he therefore sent the letters on his own account in the hope of drumming up some interest which he, personally, could then exploit in bringing a potential customer to the Company.
209. It is common ground that Mr Lawrence came into the MCL office to cover for Mr Cowling on MCL business including in relation the sale of the Site on behalf of the Company, when Mr Cowling was away of holiday 1^st – 5^th, and, 15^th – 19^th August 2005.
210. On 15^th August 2005, Mr Cowling made himself a file note (on a sheet of paper headed "Record of Meeting") of a meeting with Carter Jonas in relation to the sale of the MCL business. In that note he noted: "Neil Lawrence retiring no written partnership agreement - NL due to finish by 31/8". The inferences to be drawn are obvious namely that Mr Lawrence had not, in Mr Cowling's view yet retired from MCL and that event was intended to be linked to the Carter Jonas sale.
211. At about this time (on 17^th and 18^th August 2005) Mr Lawrence sent about 30 letters to prospective purchasers of the Site in the motor vehicle sector in which, once again, he expressly purported to be acting on behalf of the Company with its express instructions. He gives as his contact address his personal email, but he explicitly holds himself out as acting for the Company. It is quite clear that the "client" he says that he is acting for is the Company. Two facts in relation to these letters are relevant. First, Mr Lawrence sent the letters at the request of Mr Cowling with a view to re-marketing the Site following the collapse of the L&CP offer (as to which see paragraph [123] above). Secondly, but inconsistently, Mr Lawrence explained in his oral evidence that notwithstanding this he was not, in his view, acting for the Company but was instead acting on his personal behalf. So for example he inserted the reference to leasehold offers in the hope that an offer might come in that he – personally – could take to investors and exploit for a fee. He was seeking to earn money out of these opportunities by purporting to act on behalf of the Company when in his own mind this was part of a stratagem to further his own commercial interests. He never disclosed to Mr Cowling or to the Company his real intentions or the reason why he inserted the reference to the Company seeking leasehold offers. In cross examination the following exchange occurred:

"A. As I say my view at the time was there was a site there that was for sale. It had an existing consent, that was the simplest way of realising a sale. And what I'd hoped to do, you know, if one or two of those had come back leasehold, is then to take that to an investor and in this case I started to talk to Denbigh Land at the end of August again with a view to try and put a deal together

Q. So we're clear about this, and there may be no embarrassment about this on your part, Mr Lawrence, what you expected is to get an instruction from Denbigh which would give you a fee from them is that right?

A. I would hope that, if I was able to put a deal together for Denbigh, that I would be recognised in some way, yes

Q. You recognised that you weren't serving the interests of the company at that point?

A. I wasn't representing the company, but, as I said before, I maintain to this day I always worked in the company best interest, both in terms of my personal relationship with Andrew Cowling – I wanted to see the site sold and the shareholders receive some return on their investment as opposed to the route taken by other parties who wouldn't have allowed that to happen."

212. It was put to Mr Lawrence by Mr Reeve that this was "not the best business practice". Mr Lawrence first responded: "What do you mean". Counsel elaborated: "Well to allow statements to go out that are misleading like this?" To which the answer was:

"A. Well, I'm not going to disagree with that. It's loose language, I completely accept that, but I'm sure if you went through the files of an awful lot of commercial property agents you would see similar language being used when they trying to put deals together".

213. This was not just "loose language"; this was on Mr Lawrence's own account a deliberate policy of seeking to use, in an actively misleading manner, the Company's name in order to drum up business from which Mr Lawrence intended he would earn fees. Moreover, he did this having agreed with Mr Cowling to seek to re-stimulate the market on behalf of the Company. He did not tell Mr Cowling about his ulterior motives, nor did he show Mr Cowling the letters before they were sent. This has significance because it had hitherto been no part of the Company's marketing plan that they should seek leasehold offers and indeed the published particulars expressly seek only freehold offers (see paragraph [112] above).
214. On 9^th September 2005 Mr Lawrence sent an email to the Company's solicitor, Mr Mike Thomson, in which he said in relation to the Site: "I'm pleased to advise that terms have been agreed between our mutual clients, Northampton Auctions Plc and Earlplace Ltd in respect of a sale of the above property". He drafted the email himself. He added his name and "MCL Property Consultants". When questioned about this he accepted (i) that he had personally typed the email (ii) that he had also personally typed the words "MCL Property Consultants" (he said that he had erroneously used a lower case "p" instead of upper case "P" – and hence this showed that it was specifically typed by him) and he expressly accepted that when he used the phrase "our mutual clients" he was referring to Northampton Auctions Plc (not Earlplace). He thereby made a clear representation to the Company's solicitor that he was still acting for the Company.
215. On 13^th September 2005 a Deed of Dissolution was entered into between Mr Lawrence and Mr Cowling in the context of the Carter Jonas sale which makes it quite plain that as of that date Mr Lawrence was still a partner of MCL and, of course, MCL still acted for the Company. The Deed is signed by both Messrs Lawrence and Cowling and it was witnessed and signed by Mr Michael Thomson, the Company's solicitor. Under the heading "Background" the document records that for some years the parties had carried on the business of chartered surveyors and development consultants under the name "MCL" which is defined as "the Firm". It records further that they had agreed to transfer "their business as a going concern to Carter Jonas LLP under an Agreement for Sale between them and Carter Jonas". The text then goes on to record that "…in due course when all monies due to the Firm have been received under the Sale Agreement and otherwise to cease their partnership". There then followed the terms which governed dissolution. Clause 1 expressly stipulated:

"1. Dissolution. The said partnership shall be dissolved on a date to be agreed or as recommended by the Firm's accountants Hawsons".

216. MCL's accountants recommended that the partnership be dissolved only in 2012 when all of the monies that were owed to MCL (under the Sale Purchase Agreement – see below) were fully paid up. Clause 5 recorded that because Mr Lawrence had rights to fees earned in his capacity as partner Mr Cowling owed him a duty to act in his best interests.
217. Also, on 13^th September 2005 Mr Lawrence and Mr Cowling entered the Sale Purchase Agreement with Carter Jonas. Recital 1 to the agreement provided: "The Sellers are now and have for some time been carryings on in partnership the business of property consultants under the business Name". "Sellers" was defined as "…the partnership carried on by the sellers". This was an express representation to Carter Jonas that as of the date of the agreement Mr Lawrence was still a partner of MCL. Under paragraph 2.1 of Schedule 6 they warranted as "Sellers" that they had full power and authority to enter into and perform the agreement and all related agreements. This agreement was much more than a legal nicety or a technical detail (as both Mr Lawrence and Mr Cowling at various points suggested). Had the MCL partnership really dissolved on 4^th July 2005 then Mr Cowling would have continued thereafter as the sole proprietor of the MCL business and he would have been the sole vendor of the MCL business to Carter Jonas. Any reconciliation of moneys owed by MCL to Mr Lawrence would have had to be resolved through an entirely separate agreement between MCL and Mr Lawrence. However, to the contrary, for the reason that he was as of the date of the sale an extant partner, Mr Lawrence obtained material benefits under the sale agreement to Carter Jonas.
218. Of further significance is the fact that pursuant to the Letter of Instruction of 18^th October 2004 MCL was to be paid commission at a rate of 1.25% of the sale price only upon sale of the Site. As of 4^th July 2005 no sale had occurred so Mr Lawrence had no obvious right to a share of the commission that would be earned on the sale of the Site to Earlplace some 11 months later because, on his own case, he did not at that point in time have any contact with Earlplace. Yet, Mr Lawrence expected to receive, and did receive, his share of the commission paid by the Company to Carter Jonas and then to MCL for the sale of the Site to Earlplace. This can only be on the basis that he was still a partner of MCL and still owed a duty to the Company as of the date upon which MCL's entitlement to commission on the sale of the Site arose.
219. The perceptions of Mr Grove and Mr Malby of Earlplace are also relevant. They were both under the impression during August 2005 and until at least exchange of contracts in September that insofar as Earlplace was concerned Mr Lawrence was "seeing this out", i.e. still acting for MCL and the Company. Mr Malby was asked in cross examination whether Mr Lawrence had identified to him whether he had resigned from MCL. He said that Mr Lawrence did not identify a date but said: "I had the impression that he was very much seeing this out...". Mr Grove made very similar comments. What is plain is that Mr Lawrence did not say to Messrs Grove or Malby in clear and ringing terms: "I am a free agent; I have nothing at all to do with MCL or the Company". On the contrary, both had the impression – albeit somewhat vague - that Mr Lawrence was still acting for MCL and the Company during their dealings with him in August 2005. There is a certain tension in their evidence on this; they both believed that Mr Lawrence retained a connection with MCL and the Company but both were content to use Mr Lawrence to secure a deal for Earlplace. I say "tension" but in truth this reflected the economic reality of the situation that, as I have found, they were intent on securing the Site at the lowest possible price and used Mr Lawrence to assist them achieve this and they were not unduly concerned by any perceived conflict that might arise in Mr Lawrence's position.
220. On 20^th September 2005 (shortly prior to exchange of contracts) Mr Lawrence, along with Mr Lawrence Grove, Mr Malby and Mr Springett met. In an email dated 23^rd February 2010 (between Mr Lawrence and Mr Cowling in relation to the evidence to be given in this case and disclosed following a waiver of privilege) Mr Lawrence stated of this meeting: "I was definitely still wearing my MCL hat at this meeting". The email also includes this comment:

"Surely the argument is that I had to hold Earlplace's hand leading up to exchange so as to give them comfort to actually do the deal. Following exchange they talked to me about working with them on the development as a consultant by which time I'd left the MCL partnership".

In that same exchange of emails one finds also this:

"Having thought about this overnight I guess that the answer to the question is that I left the partnership on1y on 13^th September 2005 (date of deed of dissolution) and was subsequently retained by Earlplace AFTER exchange of contracts took place on 23^rd September 2005".

The clear tenor of this is that Mr Lawrence was seeking to work out in his own mind how best this chronology of events could be painted with a view to minimising his liability. There is an element of Mr Lawrence reverse engineering the evidence here. I must take this into account in unravelling the events and analysing them. However, it is significant that Mr Lawrence himself is quite clear that he was still a partner and acting for the Company long following the day when Earlplace and the Company agreed terms on 1^st September 2005.

221. Yet further confirmation exists in the form of another email exchange dated 20th February 2012 between Mr Lawrence and Mr Tim Malby of Earlplace (also disclosed following a waiver of privilege), in which Mr Lawrence records that he had been on the phone to MCL's insurers' solicitors, Clyde & Co, and that he had been asked about when he started working for Earlplace. In this email Mr Lawrence states that he worked for MCL until 14^th September 2005:

"I stated that I worked for MCL, up until 14^th September (the date the sale of MCL to Carter Jonas completed) and after that I was a free agent and the first recorded/letter to Brodie from me as Lawrence Associates was dated 29^th September.

I advised him that I had assisted you before this date and attended a meeting with you, Lawrence and Springett prior to exchange as all agents would in order to ensure the sale progressed to an exchange/completion. And that no written agreement regarding my appointment was ever confirmed and dated as it was a verbal agreement discussed over a period of time as general matters rapidly developed after exchange."

222. In relation to the question as to when Mr Lawrence ceased to owe a duty to the Company I have come to the following clear conclusions:

• First, Mr Lawrence and Mr Cowling agreed on 4^th July 2005 that Mr Lawrence would leave the partnership contingent however upon a number of future events including the sale of the MCL business to Carter Jonas and a formal dissolution of the partnership. As of 4^th July 2005 it was agreed between Mr Lawrence and Mr Cowling that Mr Lawrence would henceforward be free to exploit opportunities in his own name and that he could compete with MCL.

• Secondly, and as a qualification to the first conclusion, in engaging in independent activities it was however necessarily understood that this would not involve any activity on Mr Lawrence's part that put him in a position of conflict with the Company or MCL's continuing instruction from the Company to market the Site.

• Thirdly, and in any event, Mr Lawrence continued to owe a fiduciary duty to the Company until exchange of contracts for the sale of the Site from the Company to Earlplace on 23^rd September 2005. I note that the view of RICS (RICS Manual of Estate Agency Law and Practice, 2^nd Edition – April 2004, at B2.2.5) is that in normal circumstances an agent's duty to his client will cease upon exchange.

• Fourthly, although technically, Mr Lawrence remained a partner of MCL after exchange his duty to the Company ceased at that point since the sale price to Earlplace was then legally fixed.

b) The date upon which Mr Lawrence was first retained by Earlplace and the terms of his retainer

223. The next question is whether Mr Lawrence first started to act for Earlplace before 23^rd September 2005 such that he was prima facie placing himself in a position of conflict. The evidence may be summarised as follows.
224. Mr Lawrence first came into contact with Earlplace through a chance meeting with Mr Grove over drinks at a social event in late July 2005. There was some confusion as to the location of this first meeting (whether in a pub or at a private dwelling) but that does not matter. It is more or less common ground that during this first encounter Mr Lawrence and Mr Grove had a discussion about the fact that Earlplace was interested in acquiring property in Northampton. In a written statement prepared by solicitors signed by Mr Grove he says that at the first meeting Mr Lawrence gave him a business card with MCL upon it. He said: "Mr Lawrence told me about a site at Brackmills, Northampton for which he was the agent". In questioning, he said: "…he handed me his business card. I don't have it any longer but I think it was MCL Property Consultants on his card, but I cannot be absolutely sure of that now". This marks the starting point of the relationship between Mr Lawrence and Earlplace. Notwithstanding Mr Grove's hesitancy in the witness box (relative to his signed statement) it seems to me inherently likely that Mr Lawrence did say he was an agent for the Site (i.e. acting for the Company) and did use an MCL business card, or otherwise say something to Mr Grove which left him concluding that Mr Lawrence was acting for MCL, and that as such he was acting for the vendor (the Company).
225. It was left that Mr Lawrence would make contact thereafter. There is some lack of clarity about what happened in mid-August 2005 when Mr Lawrence re-contacted Mr Grove. Mr Grove recalled that nothing happened, save for the fact that he and Mr Lawrence agreed to meet later in the month.
226. Mr Cowling said that at some point after 19^th August 2005, Mr Lawrence mentioned Earlplace to him as a possible purchaser. The first clear evidence is from 30^th August 2005 when Mr Lawrence emailed Mr Cowling and said that he was meeting his: "potential partners of the auction centre tomorrow and Thursday. I would therefore hope to be able to confirm an offer and the name of the purchasing company after these meetings". Later that same day he said: "I'm 99% certain that I will have an acceptable offer (both price and funding-wise) for you by the weekend". On the basis of this I conclude that Mr Lawrence had been in discussion with Mr Grove and/or Mr Malby of Earlplace before 30^th August 2005 and that these discussions had developed to the point where Earlplace were close to being able to finalise an offer which Mr Lawrence was able to convey.
227. Mr Grove did not contradict this conclusion. His evidence was vague as to when discussions first occurred: "…I don't know, and I answered this question beforehand, I can't remember when I became aware, but my recollection of that meeting was to discuss this particular project, more particularly. But I can't remember the ancillary bits to the conversation".
228. These discussions between Mr Lawrence and Earlplace preceded the agreement of Mr Lawrence's retainer on 31^st August 2005. In his initial signed statement Mr Grove thought that the meeting at which he first agreed Mr Lawrence's retainer occurred on 14^th September 2005 but in oral evidence he confirmed that it was 31^st August 2005. He explained that the retainer was agreed over lunch at the Forest Hotel in Dorridge. Mr Grove did not like the idea of an hourly rate and preferred a "no hay no pay" deal i.e. a conditional fee agreement. The basis of the deal was "…that Neil would receive one-third of the net profit earned by Earlplace". The deal was done on a handshake. It was never formalised or reduced to writing. Both Mr Lawrence and Mr Malby agreed with this version of events. I find that the agreement between Mr Lawrence and Earlplace as to the former's retainer was made on 31^st August 2005.
229. It is clear that at this meeting on 31^st August 2005 Mr Lawrence discussed with Earlplace all of the various options that might be used to exploit the Site because Mr Grove recalls discussing development issues and whether:

"…we could flip it to one of the haulage operators and make a £750,000/£1m profit. Alternatively we could sweat the asset, get the planners working and go for B8 change of use"

230. It is to be noted that Mr Lawrence saw the opportunity for the site to be "flipped" i.e. quickly sold on with the chance for a quick profit of up to £1m. On the basis of his new agreed retainer, had this particular "flip" occurred, Mr Lawrence would have made a very quick profit of up to circa £330,000 (on a sale with a profit of £1m). It must hence be inferred that as of this moment Mr Lawrence was acutely aware of the advantages of seeing the Site sold to Earlplace for the lowest possible rate since this would inflate his one-third of the uplift.

c) Whether Mr Lawrence was in a position of conflict as between the duties he owed to the Company and his own personal interest?

231. A conflict arises when there is a "real sensible possibility of a conflict" (see case law cited at paragraphs [181-183] above).
232. It follows from the above that Mr Lawrence was in a position of growing conflict throughout August 2005 and thereafter until exchange. In early to mid August 2005, Mr Lawrence was in communication with Earlplace about acting for them. His communications were on a speculative basis. He set out to lure Earlplace in as a client and to put himself in a position whereby they would in due course pay him. He did not know what shape the retainer would take. However, he was in possession of information that would be of material value to Earlplace in assisting them to decide whether to bid and if so upon what basis. At the very least he was in a position of real risk in relation to his duty to the Company from this early point onwards. He had at this point placed himself in a position whereby he was seeking to be paid by both sides to the transaction and whereby his remuneration would be connected to the sale.
233. I address this in two stages. First in relation to the communication by Mr Lawrence of information to Earlplace. Secondly, in relation to the involvement of Mr Lawrence, advising and acting for both the Company and for Earlplace, in the sale of the Site in the period following the agreement of Mr Lawrence's retainer on 31^st August 2005 and up until exchange on 23^rd September 2005.

(i) The communication of information by Mr Lawrence to Earlplace

234. In the present case I have already found that Mr Lawrence remained a partner of MCL at least until 23^rd September 2005 and, more importantly, that as of that date he also owed a fiduciary duty to the Company. This means that the use of information belonging to the Company prior to this date cannot be assessed in the light of the law relating to maturing opportunities. On the contrary, it must be evaluated according to the stricter rules governing use of the principal's information by an agent during the agency.
235. The first issue to answer is as to the nature and extent of the information communicated by Mr Lawrence to Earlplace during the period when he owed a fiduciary duty to the Company.
236. As to this I find that prior to (i) 31^st August 2005 (date of retainer being agreed) and (ii) 1^st September 2005 (date Earlplace and Company agree the £2.25m consideration) Mr Lawrence imparted to Earlplace information which was confidential to the Company and/or which belonged to the Company in the sense that it was commercially valuable to the Company and had come into Mr Lawrence's possession, solely upon the basis of his instructions from the Company and which the Company would or might not wish to see divulged to a prospective purchaser.
237. I make this finding upon the basis: (i) that Mr Lawrence on his own case considered himself wholly free and unfettered during this period and could see no reason why he should not assist Earlplace; (ii) that he was generally prepared at this time to act towards third parties in a manner which viz a viz the Company he agreed was "not the best business practice" (see paragraphs [211-213] above); and (iii) that an analysis of the evidence indicates categories and types of evidence that Mr Lawrence did or must have imparted to Earlplace during this period.
238. First, Mr Lawrence considered himself free to impart to Earlplace any information that he possessed which might have been of interest to Earlplace and which might therefore have led Earlplace to value Mr Lawrence's services and retain him to advise them (speculatively) on the purchase from the Company and/or in relation to the subsequent disposition of the Site thereafter (assuming Earlplace managed to acquire it). His basic premise during the trial was that as of 4^th July 2005 he was an entirely free agent. As such if Mr Lawrence held valuable information in his mind he did not feel in any way encumbered by an obligation not to use it.
239. Secondly, as to Mr Lawrence's willingness to use information in his possession at this time I rely upon the conduct of Mr Lawrence referred to above which shows that he had adopted an undisclosed strategy of using his connection with the Company for his own personal gain. Again, this is a strong indictor that not only did Mr Lawrence not feel inhibited in exploiting his connection with the Company, but that he actually sought to do in a misleading manner which fell short of "best practice".
240. Thirdly, it is possible to identify from documents disclosed the range and nature of information that Mr Lawrence imparted to Earlplace.
241. Evidence from this point in time shows that Mr Lawrence was on the cusp of advancing a fully fledged offer to the Company on behalf of Earlplace (see paragraphs [226-230] above). Since Mr Lawrence had arrived at this advanced stage in his relationship with Earlplace, it necessarily presupposes that he had engaged in prior discussions with them about all aspects of their bid including, critically, at what level to pitch the offer. This conclusion is supported by the evidence of Mr Grove and his recollection of the conversation he and Mr Malby had with Mr Lawrence on 31^st August 2005 (when they agreed his retainer). It emerged from Mr Grove's evidence that, at the very least (i.e. the following list is not exhaustive), the following topics were discussed: (i) what they would do with the Site (i.e. if they purchased it); (ii) whether Earlplace could "flip" it to haulage operators; (iii) the level of "profit" that might be made on such a "flip"; (iv) whether Earlplace could keep it and "sweat the asset get the planners working and go for B8 change of use"; (v) which individuals and parties were influential in relation to any plan to seek change of use (they identified EP and WDNC); and (vi), the "politics" involved. This list indicates that Mr Lawrence was laying bare his knowledge to Earlplace. It is of significance that Mr Lawrence and Messrs Grove and Malby were discussing the "profit" that they might make on a "flip" of the Site (item (iii) above). To be able to calculate a "profit" assumes that the parties had a clear idea of the price at which Earlplace would have purchased the Site and this necessarily assumes that Earlplace had a good idea of what they needed to bid to secure the Site. I am in no doubt that Mr Lawrence advised Earlplace on how best to get the best price from the Company.
242. At this time, Mr Lawrence clearly possessed information that would have been valuable to Earlplace. For instance, he knew, albeit in broad terms, that the financial position of the Company was very serious and that Mr Cowling badly needed a sale of the Site. He would have known all about the commercial and planning related problems that the Company had experienced with NBC, WDNC and EP. It is not necessary to detail all of the evidence which shows the extent to which Mr Lawrence had access to confidential and/or proprietary information in the period 2002-2005 but there were numerous references in the documents which evidence this. This gave him access to not only the key individuals, from which he learned of their views and concerns, but also access to confidential or commercially valuable information emanating from those companies and organisations such as master plans for developments, relocation reports and confidential position papers relating to possible commercial offerings. It must be recalled in this regard he was tasked by the Company to assist Prologis and sat in on a number of meetings with key personnel involved in seeking to progress the Prologis agreement. In short he held a good deal of "inside track" information about the Company, its negotiating strategy, and the myriad complications of the planning process.
243. In his evidence Mr Grove said that he had agreed with Mr Malby that they needed "local legs" i.e. someone with specialist local knowledge of the planning complexities and the individuals involved. They decided that Mr Lawrence was that person.
244. The conclusion to all of this is that Mr Lawrence did impart to Earlplace valuable commercial information, at least a substantial portion of which was either confidential to the Company or was information which came into Mr Lawrence's possession because, and only because, he was working for the Company and which the Company would not have wished to be divulged to Earlplace because it would have increased their leverage viz a viz the Company.
245. Prima facie, this was a breach of his duty to act loyally towards his principal, the Company. As at the date upon which Mr Lawrence imparted that information to Earlplace his personal interest was in conflict with that of the Company. He was imparting information to Earlplace because he wished to make money out of them for an activity for which he was also due to be paid by the Company.
246. I would emphasise that whilst it is an independent, free standing conflict I do not view this particular conflict of interest as the very crux of the case against Mr Lawrence. That conflict manifested itself most acutely on 31^st August 2005 when Mr Lawrence agreed his retainer with Earlplace and I would have found Mr Lawrence to be liable for breach of fiduciary duty on the basis of the events of 31^st August 2005 only i.e. irrespective of the communication of information.
247. However, the use or misuse of confidential information was itself a serious conflict and it is also relevant to the issue of vicarious liability that I have to decide under Section 10 Partnership Act 1890: See paragraphs [268-278] below.

(ii) The conflict arising out of the negotiation of the retainer on 31^st August 2005

248. I turn now to the second conflict. As of 31^st August 2005 Mr Lawrence had put himself in a position whereby his duty of loyalty to the Company was in conflict with his own personal interest. The situation is closely analogous to that referred to by Lord Justice Tuckey in Hurstanger cited at paragraph [179] above who perceived the conflict as obvious. His self interest now lay in securing a sale by the Company to Earlplace at the lowest possible price. The lower the sale price the greater the chance of the uplift on a resale being substantial and the greater the "hay". At the same time because he was still a partner in MCL and working for the Company he stood to be paid a fee by the Company earned by virtue of the same sale.
249. However, since the potential return from acting for Earlplace massively outweighed the potential return from acting for the Company, there was a powerful incentive on Mr Lawrence to do whatever he could, to see the sale proceed to Earlplace at as low a rate as possible.
250. It is important to identify one further aspect of this arrangement. Since the retainer of one third of the uplift was not a retainer based upon the consideration paid by Earlplace to the Company it is not possible to say that the £744,035.02 is a proxy market valuation which reflected the incremental value of the Site which was being creamed off and paid to Mr Lawrence. In other words, whilst it is tempting to say that the real valuation paced upon the Site by Earlplace was £3m of which they would pay £2.25m to the Company and c. £0.75m to Mr Lawrence that would not be logical. The payments to be made to Mr Lawrence were not by way of commission on the sale of the Site to Earlplace. In fact Earlplace paid him nothing at all for securing the sale. The payment focused upon what happened next.
251. On 1^st September, Mr Lawrence attended a meeting between the Company and Earlplace at which the terms of the deal were negotiated. During that meeting Mr Cowling, who was negotiating on behalf of the Company, sought to push the price up and Mr Cowling says that he attempted to agree an element of overage on the sale (i.e. a clawback). But Mr Grove and Mr Malby were having none of it and made a £2.25m "take it or leave it" offer. Information imparted prior to this date by Mr Lawrence to Messrs. Grove and Malby could well have been highly influential in persuading them to offer low and stick firmly to their guns. If they knew that Mr Cowling was in dire financial straits, that he was subject to Bank pressure to do a quick deal, and that they were the only show in town, that would have stiffened their negotiating sinews. If they knew that higher priced offers had recently fallen by the wayside, that would also have added to their resolve to beat Mr Cowling down in the realistic hope that he would be forced to settle for a low payment whch would cover the bank debts and provide some modest return to shareholders.

d) Whether there was adequate disclosure

252. I turn now to consider the issue of disclosure. I have to decide whether Mr Lawrence disclosed to the Company his conflicts such that what was a prima facie breach of duty on analysis turns out to have been with the consent and blessing of the Company. In my judgment the relevant period of time during which to measure this issue is that between the first time when Mr Lawrence made contact with Earlplace (late July 2005) and the date on which the agreement in principle was arrived at to sell the Site for £2.25m (1^st September 2005). My conclusions on this based upon my findings are as follows.
253. First, Mr Cowling was first aware that Mr Lawrence was acting for Earlplace from about 30^th August 2005: See paragraph [226] above.
254. Secondly, Mr Lawrence did not disclose to Mr Cowling the terms of his retainer agreed on 31^st August 2005. It was a critical part of his disclosure obligation to lay bare those terms: See the case law at paragraphs [188-189] above.
255. Thirdly, Mr Lawrence did not disclose to Mr Cowling that he had provided to Earlplace the information set out above (see paragraph [234-247]) in the period up to and including the 1^st September 2005. He should have disclosed to the Company his intent to reveal information to Earlplace and the proposed subject matter of the disclosure, before he imparted any such information to Earlplace. Following the meeting on 1^st September 2005 Mr Malby of Earlplace did communicate directly with Mr Cowling seeking information about the Site and about valuation information which Mr Cowling agreed to provide, via Mr Lawrence. It was argued therefore that the provision of information to Earlplace, was consented to. However, I am not, in this judgment, concerned with this particular disclosure because in my view the crucial period is that prior to 1^st September 2005 when the basic deal was struck and the die was cast. That earlier point in time was the crux of the matter for the purpose of analysing the conflict. In the absence of full disclosure, Mr Lawrence had no right to divulge this information to Earlplace: See the case law at paragraphs [193-199] above.
256. Fourthly, based upon unchallenged evidence given by Mr Cowling: (i) Mr Cowling did not enquire of Mr Lawrence as to his remuneration with Earlplace; (ii) this was because he had formed the view that Mr Lawrence had left the MCL partnership on 4^th July 2005; and (iii), in any event, Mr Cowling assumed that Mr Lawrence would be paid on a fee basis or upon an hourly rate basis for his work on the sale from the Company to Earlplace. None of these facts constitutes a defence. The duty was on Mr Lawrence to disclose, not upon Mr Cowling to enquire: See case law at paragraph [188] above.
257. Fifthly, had Mr Cowling known of the terms of Mr Lawrence's retainer (i.e. that it was based upon the uplift value of the subsequent disposal) he would have referred this to the Board.
258. In view of these findings this was partial disclosure within the meaning of the case law referred to at paragraphs [188-191] above. I am quite clear that for there to have been full disclosure it was necessary that Mr Lawrence disclose: (i) that during August 2005 he was providing information belonging to the Company to Earlplace that would have been of use to them in formulating their offer to the Company for the Site; and (ii), the basis of the retainer that he agreed on 31^st August 2005. This was necessary because had that been disclosed in advance the Company might have taken a number of protective steps. It might, for instance, have objected upon the basis that in providing this information and advice he would be divulging commercially valuable information that he had only acquired by virtue of this long association with the Company qua partner in MCL and that in so acting, he risked compromising the ability of the Company to obtain the best price from Earlplace for the Site. They might, by way of further example, have terminated his agency for the Company. It is impossible to know exactly what would have happened and the law does not require me to make findings since the breach occurred when Mr Lawrence placed himself in the position of conflict and not upon proof of loss by the Company.
259. In these circumstances, the Company did not give consent to Mr Lawrence's conduct amounting to a conflict of interest. It is no answer to this conclusion to say that Mr Cowling could or should have asked: See cases cited at paragraph [188] above. In any event, even had he asked, I do not conclude that Mr Lawrence would in fact necessarily have given full disclosure. Mr Lawrence proved stubbornly reluctant to disclose his retainer terms until compelled by court order in 2012. This was a matter he was determined to keep confidential.

f) Conclusion in relation to the Second Defendant

260. In view of all of the facts and matters set out above I reach the conclusion that Mr Lawrence was in breach of his fiduciary duty owed to the Company by virtue of his conduct towards Earlplace.
261. The conduct which created the breach occurred during a period of time when Mr Lawrence owed a continuing fiduciary duty to the Company in relation to the sale of the Site.
262. By acting for both vendor and purchaser during this period he placed himself in a position where he had an obvious conflict of interest: See case law cited at paragraph [179] above. The conflict was made acute by, first, the fact that et seq Mr Lawrence communicated commercially confidential and vulnerable information to Earlplace that he possessed purely by virtue of his being an agent of the vendor Company; and secondly, by virtue of the powerful incentive which the conditional terms of his retainer with Earlplace imposed upon him to see the Company sell the Site at the very lowest price possible.
263. There is a clear nexus between the breach and the potential loss by the Company and the personal benefit to Mr Lawrence: See the case law at paragraph [185] above. Ordering an account would not risk unjustly enriching the Company.
264. Mr Lawrence did not give full disclosure such that the ostensible consent that Mr Lawrence claims he had, was not procured upon a fully informed basis.
265. However, as a result the disclosure being partial and not total the fee earned by Mr Lawrence is not treated as being fraudulent. It is not the receipt of a bribe: See case law at paragraph [190] above. It is also means that the remedies that are available to the Court to address this breach are more limited than would have been the case had the failure been total.
266. The effect of this is that I must apply equitable principles to determine the remedy.
267. My conclusions on this are: (i) Mr Lawrence will account for the sum of £744,035.02, this being the commission earned through his breach; (ii) he will also account for the fee he earned paid by the Company (to Carter Jonas/MCL) in respect of the sale of the Site since this also is a fee connected to the conflict of interest; and (iii) interest will be paid from the date of receipt of those sums (see paragraph [192] above).

(4) Position of First Defendant (Mr Cowling): Section 10 Partnership Act 1890

a) The statutory framework

268. All allegations against Mr Cowling that he was personally guilty of breaching his fiduciary duty to the Company were abandoned during the trial. I turn therefore to consider the liability of the First Defendant in the light of my judgment that the Second Defendant is liable to the Claimant for breach of fiduciary duty. The question is whether Mr Cowling is vicariously liable for Mr Lawrence's default. The starting point is Section 10 Partnership Act 1890 which is in the following terms:

"Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalties incurred, the firm is liable therefore to the same extent as the person so acting or omitting to act."

b) The House of Lords in Dubai Aluminium

269. Section 10 is the statutory basis upon which vicarious liability is attributed to partners other than the wrongdoer. The scope of this provision was considered by the House of Lords in Dubai Aluminium Co Limited v Salaam & Others [2002] UKHL 48; [2003] 2 AC 366. In that case in settlement of the plaintiff's claim to recover commission and other payments made to wrongdoers as a result of a fraudulent scheme involving sham contracts the plaintiff received payments from a number of defendants. Amongst the defendants was a solicitor who participated in the sham schemes by drafting agreements, by being involved in the administration of the sham scheme, and, by giving direct advice and assistance to other wrongdoers who were neither his clients nor those of his firm. The solicitor's firm made payments as part of the settlement; it was, however, common ground that the co-partners of the solicitor were personally innocent of any wrongdoing. In contribution proceedings to determine the apportionment of the party's liabilities to the plaintiff the judge assumed, pursuant to Section 1(4) of the Civil Liability (Contribution) Act 1978, that the factual basis of the claim against the solicitor for dishonesty and knowing assistance in the fraudulent scheme could be established. He held that by virtue of Section 10 Partnership Act the firm was liable to the plaintiff because the alleged wrongful acts of knowing assistance by the defendant's solicitor were in the ordinary course of the firm's business. On appeal, an issue arose as to whether the solicitor's conduct was, when properly analysed, sufficient to trigger the liability of his co-partners. The Court of Appeal held that since the firm's partners had not authorised the solicitor to act as he did upon their behalf, and it was not in the ordinary course of the business of a solicitor's firm to plan, draft and sign sham agreements giving effect to a scheme known to be dishonest, the firm was not vicariously liable and was therefore not entitled to claim contribution in respect of the sum paid to the plaintiff. On appeal the decision of the Court of Appeal was set aside and that of the first instance judge was restored. The leading judgment was given by Lord Nicholls with Lord Slynn and Lord Hutton concurring.
270. Lord Nicholls started his analysis by stating that the issue of vicarious liability was not determined "simply" by asking whether the act in question was authorised: see paragraphs [17] and [21] since this did not govern whether an act or omission was done in the ordinary course of a firm's business. Lord Nicholls identified [21,22] the policy which underlay vicarious liability:

"The reason for this lies in the legal policy underlying vicarious liability. The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risk to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.

This policy reason dictates that liability for agents should not be strictly confined to acts done with the employer's authority. Negligence can be expected to occur from time to time. Everyone makes mistakes at times. Additionally, it is a fact of life, and therefore to be expected by those who carry on business, that sometimes their agents may exceed the bounds of their authority or even defy express instructions. It is fair to allocate risk of losses thus arising to the business rather than leave those wronged with the sole remedy, of doubtful value, against the individual employee who committed the wrong. To this end, the law has given the concept of "ordinary course of employment" an extended scope."

271. Lord Nicholls considered the authorities. He pointed out that other judges, and in particular Lord Denning MR, had recorded that the cases were "baffling": (ibid) at [23] citing Morris v CW Martin & Sons Ltd [1966] 1 QB 716, 724. He then proceeded to provide what he described as the "best general answer" (ibid paragraph [23]) in the following formulation:

"…the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm's business or the employee's employment."

272. Lord Nicholls emphasised that an element of fairness fed into the analytical equation. He cited the speeches of Lord Millett and Lord Steyn in Lister v Hesley Hall Ltd [2000] 1 AC 215, 223-224, 230 and 245. He also cited McLachlin J in Bazley v Curry (1999) 174 DLR (4^th) 45,62:

"…the policy purposes underlying the imposition of vicarious liability on employers are served only where the wrong is so connected with the employment that it can be said that the employer had introduced the risk of the wrong (and is thereby fairly and usefully charged with its management and minimisation)."

273. He cited, further, Professor Atiyah in "Vicarious Liability" (1967) Page 171: "the master ought to be liable for all those torts which can fairly be regarded as reasonably incidental risks to the type of business he carries on". And then he proceeded, importantly in my view, to say as follows:

"24. In these formulations the phrases "may fairly and properly be regarded", "can be said" and "can fairly be regarded" betoken a value judgement by the court. The conclusion is a conclusion of law, based on primary facts, rather than a simple question of fact.

25. This "close connection" test focuses attention in the right direction. But it affords no guidance on the type or degree of connection which will normally be regarded as sufficiently close to prompt the legal conclusion that the risk of the wrongful act occurring, and any loss flowing from the wrongful act, should fall on the firm or employer rather than the third party who was wronged. It provides no clear assistance on when, to use Professor Fleming's phraseology, an incident is to be regarded as sufficiently work-related, as distinct from personal…Again, the well known dictum of Lord Dunedin in Plumb v Cobden Flour Mills Co Ltd [1914] AC 62, 67, draws a distinction between prohibitions which limit the sphere of employment and those which only deal with conduct within the sphere of employment. This leaves open how to recognise the one from the other.

26. This lack of precision is inevitable, given the infinite range of circumstances where the issue arises. The crucial feature or features, either producing or negativing vicarious liability, vary widely from one case or type of case to the other. Essentially the court takes an evaluative judgment in each case, having regard to all the circumstances and, importantly, having regard also to the assistance provided by the previous court decisions".

Lord Justice Millett in his judgment (at paragraph [107]) posed the fairness question in a way which linked fairness or justice to an overall assessment of the normal risks which should be borne by the partnership. He observed that vicarious liability was "…a loss distribution device based on grounds of social and economic policy" and endorsed the articulation of the principle in the American Law Institute, Restatement of the Law, Agency, 2d (1958) Section 229:

"The ultimate question is whether or not it is just that the loss resulting from the servant's acts should be considered as one of the normal risks to be borne by the business in which the servant is employed".

274. At paragraph [27] Lord Nicholls stated that historically the courts were less ready to find vicarious liability in cases of employee dishonesty than in cases of negligence. He cited Hamlyn John Houston & Co [1903] 1 KB 81, 85 in which the Court of Appeal had held that it was proper to attribute liability to the firm where the wrongdoer had been given authority to collect information about competitors but performed that task by using illegitimate means as opposed to legitimate means. The Court in that case rested the decision on the "risk" principle, namely that the principal having selected the agent, and being the person who would benefit from his own efforts if successful, was justly pinned with the risk of the agent "exceeding his authority in matters incidental to the doing of the acts the performance of which had been delegated to him". Lord Nicholls deduced from this a distinction between cases where an employee or agent was engaged in furthering his employer's or principal's business and cases where the employee or agent was engaged solely in pursuing his own interests on a "frolic of his own". In the latter type of case there was less basis for attributing liability to the innocent partner or employer.
275. In Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 Lord Wilberforce rejected the broad proposition that so long as an employee was doing acts of the same kind as those that were within his authority to do the employer was liable. He stated:

"The underlying principle remains that a servant, even while performing acts of the class which he was authorised, or employed to do, may so clearly depart from the scope of his employment that his master will not be liable for his wrongful acts."

In that case the employee was authorised to conduct valuations and negligently performed a valuation without authority from his employers and not on their behalf. It was held that in so doing he was not acting as an employee of the defendant company which was not, thereby, liable for his wrongful acts. Lord Nicholls, in Dubai Aluminium, observed that this: "was a case of negligence, but a similar approach is no less applicable in cases of dishonesty". (ibid paragraph [33]).

c) Summary of relevant questions to ask

276. The following principles may be derived from these authorities which help identify the approach to be applied:

i) The starting point is to identify the business of the partnership and what the wrongdoer was authorised to do within the scope of the business.

ii) The next stage is to identify the wrongful acts.

iii) Then an assessment is made of the closeness of the connection between the wrongful conduct and that person's authority.

iv) There then follows an evaluative assessment of whether the wrongful conduct may "fairly and properly" be regarded as being done by the wrongdoer in the course of business.

v) In making the assessment case law shows that:

a) Whether the wrongdoer acts without authority may militate against vicarious liability but is not determinative;

b) Where the wrongful act involves dishonesty or fraud that is a factor militating against vicarious liability;

c) Where the wrongdoer is acting for personal gain that is a factor militating against vicarious liability.

d) Conclusion in relation to the First Defendant

277. I consider now the application of the above principles to the facts of this case. For the reasons that I set out below I conclude that the First Defendant, Mr Cowling, is not vicariously liable for the breach of fiduciary duty by the Second Defendant, Mr Lawrence. My reasons may be summarised as follows:

i) The scope and state of the business of MCL and of the authority of Mr Lawrence: As from 4^th July 2005 the business of MCL was still that of an estate agency which dealt with commercial property. It was, however, an agency in transition and moving from active partnership to dissolution. It had been agreed that the business would be sold as soon as possible to Carter Jonas and the partnership would be dissolved once practicable following the sale. There was, accordingly, a "business" only in the limited sense that the existing business was being held in limbo pending the sale to Carter Jonas, which at that point in time was assumed to be relatively imminent, and the concept of an "ordinary course" of that business and Mr Lawrence's conduct in relation thereto must be viewed in this context. The residual MCL business was run by Mr Cowling. Mr Lawrence was essentially free to act as he saw fit, including in competition to MCL, but subject to those incidental caveats and provisos that were necessary to ensure a smooth sale to Carter Jonas. For the detailed evidential reasons that I have set out above, this meant that technically Mr Lawrence remained a partner in MCL for the time being and, most critically of all, retained a fiduciary obligation to the Company in relation to the sale of the Site. The starting point for the analysis therefore is that this was not a situation of an ongoing business which had an "ordinary course" to it. This was a business in run off and in which Mr Lawrence had only a vestigial involvement. As to Mr Lawrence's authority his freedom to act as he pleased, and without reference to Mr Cowling, was subject to the proviso that in relation to the Site he would not act against the best interests of the Company. This did not preclude Mr Lawrence introducing possible purchasers to the Company but his authority precluded conducting himself in any way which amounted to an undisclosed conflict or which prejudiced the position of the Company in relation to the sale of the Site. There was hence at this time only a very limited way in which Mr Cowling can be said to be responsible for the conduct of Mr Lawrence by reference to the fact that they were still in partnership together. Following the judgment being handed down in draft Mr Reeve submitted that Mr Cowling turned a "blind eye" to Mr Lawrence's conduct and thereby implicitly authorised it. As to this there was no evidence upon which I could properly have come to this conclusion. Mr Reeve sought to contend that there was evidence that both Defendants had engaged in a consistent course of conduct over time of acting for and being paid by vendors and purchasers to the same transaction and that this should be taken into account in concluding that Mr Cowing did authorise Mr Lawrence's actions and that therefore he could and should be liable for Mr Lawrence's conduct. But he also fairly accepted that "…this was not explored in the evidence". Ultimately, my conclusions must be based upon the evidence adduced at trial. It would be wrong of me to draw inferences from disparate pieces of evidence referred to after the close of evidence whose probative value was not tested in evidence. And lest there be doubt about it, I was during the trial quite clear in my own mind that the issue of vicarious liability was a live issue which had been raised by Mr Walker for the First Defendant and that its analysis would necessarily depend upon the findings of fact I ultimately made in relation to Mr Lawrence. I do not therefore accept the submission, also made after the hearing, that the issue of vicarious liability was not a truly live one during the hearing.

ii) The wrongful acts: The conflict arose in relation to payment terms not because Mr Lawrence received commission from Earlplace on the sale of the Site to them, since his retainer did not provide for any reward on the first sale of the Site to Earlplace. On the contrary (see paragraph [250] above), it arose because Mr Lawrence entered an agreement with Earlplace which governed payment for work in relation to the Site in the future. The second component of the wrongful acts (provision of information) did involve actions occurring during the period when the MCL business was in the process of being sold to Carter Jonas but again this was also in relation to the obtaining of instructions by Mr Lawrence subsequent to MCL's contract with the Company coming to an end.

iii) Assessment of the closeness of the connection between the wrongful conduct and Mr Lawrence's authority: An important point is that the wrongful conflict arose in connection wit the procuring and negotiation of a retainer which applied to the period following the cessation of MCL's retainer with the Company. Without disclosure, Mr Lawrence procured and negotiated an agreement to undertake future work which created an incentive operative pre-sale to act against the best interest of the Company. That future work would however be far removed from the ordinary course of the MCL business; the payment mechanism took effect after exchange of contracts which is the point in time when I have concluded that Mr Lawrence's duty to the Company will have ceased and, to all intents and for all practical purposes, his lingering relationship with MCL will also de facto have ceased. Nonetheless, it was this agreement which created the conflict of interest which occurred whilst he was still a partner of MCL. The unusual "no hay no pay" deal actually concluded was not within the scope of any authority that Mr Lawrence can lay claim to, implied or implicit. It arose from an informal retainer which quite separate from the normal course of the MCL business. In short the wrongful conduct was distant from the ordinary course of the MCL business and was outside of Mr Lawrence's authority. Mr Lawrence wrongly treated himself as wholly severed from the partnership from 4^th July 2005 whereas in reality the connection was only partially severed. He embarked upon a course of conduct throughout August 2005 which was designed to further his own personal interests at the expense, if needs be, of both MCL and the Company. His conduct in mid-August referred to in paragraphs 208-213 is illustrative of this cavalier approach to the true analysis of his authority. His conduct generally can be characterised as: (i) falling outside of his authority; (ii) involving an element of sharp practice; (iii) reflecting a single minded desire to pursue personal interest at the expense of the Company and of MCL. In terms of where it sits on the scale of vicarious liability it is closer to the "frolic of one's own" and other case law which excludes vicarious liability than it is to case law where the conduct is closely aligned to the firm's ordinary business and where vicarious liability attaches.

iv) Fairness: Section 10 of the Partnership Act 1890 is to be construed through a prism of fairness and equity and the conclusion I have arrived at is a fair and equitable one in all the circumstances. I accept that Section 10 does not mandate an open ended equitable or fairness enquiry; but I take my cue from the judgment of Lord Nicholls in Dubai Aluminium that the closeness of the connection between the Defendants' acts and the ordinary course of business is one which is to be informed by fairness and equity. I take into account that, unlike in the decided cases, the person against whom vicarious liability is sought is also the person who stands to lose most by the defaulting agent's conduct. This is, of course, because Mr Cowling is the 41% shareholder in the Company. The nexus between the loss of the Company and the diminution in the value of Mr Cowling's shareholding is particularly close given that the Site was effectively the Company's sole asset at the time of the sale. I have also found as a fact that Mr Cowling would have disclosed to the Company Mr Lawrence's retainer had he known about it. I find that at all material times in his capacity qua director of MCL Mr Cowling sought to act in the best interests of the Company, that he had the authority of the board for the sale of the Site to Earlplace and that he had informed the Board of Mr Lawrence's involvement with Earlplace insofar as he was aware of it. These are matters which can be taken into account.

v) My conclusion does not vary according to the classification of the breach by Mr Lawrence and whether it is a breach of fiduciary obligation, negligence or breach of contract.

vi) I therefore conclude based upon the combination of the above evidential features that the unauthorised conduct of Mr Lawrence in relation to Earlplace is sufficiently divorced from the ordinary business of MCL to enable me to conclude that it was not in the ordinary course of business. This is closer to the "frolic of own" cases and to cases of dishonesty or malpractice where case law suggests that vicarious liability may not be imposed.

278. In conclusion I find that Mr Cowling is not vicariously liable for the breach of fiduciary duty on the part of Mr Lawrence.

F. CONCLUSION

279. In conclusion:

i) Mr Cowling: Mr Cowling is not liable to the Claimant.

ii) Mr Lawrence: (a) Mr Lawrence is liable for breach of fiduciary duty owed to the Company and is liable to the Claimant in that regard; and (b) Mr Lawrence is not liable to the Claimant for negligence.

I will hear submissions on any matters now outstanding.