BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Rolls Building, London, EC4A 1NL |
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B e f o r e :
(sitting as a Deputy High Court Judge)
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GOLDBERG LONDON LIMITED |
Claimant |
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- and – |
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PRIMELODGE DEVELOPMENTS LIMITED |
Defendant |
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Edward Bennion-Pedley (instructed by Irwin Mitchell LLP) for the Defendant
Hearing date: 18 May 2022
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Crown Copyright ©
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and released to The National Archives. The date and time for hand-down is deemed to be 3 October 2022 at 10.30am.
Jason Coppel KC:
Introduction
i) GLL and PDL are parties to a joint venture agreement dated 17 November 2015 ("the JVA") by which, according to the recital to the JVA, the parties agreed for GLL to develop land at 41 Trinity Close, London E11 ("the Property") and for "distribution of the resulting sale proceeds" in accordance with the terms of the agreement. Clause 7 of the JVA made provision for various sums to be paid out of the gross sale proceeds of the flats constructed in the Property ("the Dwellings", to use the JVA's terminology) before profits were distributed to PDL and GLL.
ii) The Property has been developed into flats, with the development being completed in July 2019. I was informed at the hearing that all of the flats had been let, some as social housing. None of the flats has yet been sold.
iii) The parties have been in dispute both about whether the Property should be sold and about the terms of the distribution of the proceeds of sale.
iv) By Claim BL-2018-002728, PDL sought various declarations and orders against GLL. In an Order dated 29 July 2019 ("the DMA Order"), Deputy Master Arkush granted summary judgment in favour of PDL on the entirety of its claim and made various declarations including that the JVA was valid and binding (in the face of objections by GLL that it was not) and this declaration regarding the distribution of sale proceeds (§2b):
"The Claimant is entitled to be paid 50% of the profits of the proceeds of sale of each dwelling, alternatively of the property, such profits to be calculated after deducting from the proceeds of sale the sums set out in clause 7 of the Agreement, subject to a cap of £4m in respect of any deduction permitted for repayment of the Development Loan."
v) The Deputy Master also declared that PDL had a right to enter upon and take possession of the Property, but could only exercise that right following further order of the Court granting it possession (§2d).
vi) The Deputy Master also made orders for specific performance, including of clause 2.7 of the JVA which requires GLL to make available accounting information relating to the development of the Property and of an obligation to grant PDL a 50% shareholding in the Claimant.
vii) GLL sought to appeal against the DMA Order. It was refused permission to appeal save in respect of a challenge to the §2b declaration regarding distribution of sale proceeds, where an oral permission hearing was directed. Before that hearing could take place, the application for permission to appeal was withdrawn on the terms of a consent order dated 20 December 2019. The terms of the schedule to the consent order included a recognition by the parties that neither had any cause of action against the other in respect of all matters relating to the JVA (§10).
viii) GLL did not comply with the DMA Order and proceedings for committal of Imran Ul Haq, the controlling mind of GLL, followed. These resulted in the share transfer which had been ordered by the Deputy Master.
ix) The parties have continued to disagree about the implementation of the JVA, and the current claim is the latest manifestation of that disagreement.
Relevant legal principles
"The correct approach on applications by defendants is, in my judgment, as follows:i) The court must consider whether the [party] has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91 ;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63 ;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it.
The reason is quite simple: if the [party]'s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
The Claim
"21.1 The necessity to put and keep the property in good order and the need to keep the lending bank and their loan satisfied;21.2 The fact that the units are actually being let and currently have not been sold;
21.3 The funding arrangements presently in place not being indefinite;
21.4 The timing for making a distribution of proceeds;
21.5 The distinction as between the sequence in which the proceeds of sale, or value are to be distributed and the calculation of the sums which are subsequently to be distributed.
21.6 The actual cost of the development and the construction costs incurred by GLL and GHL, and the significant changes to the original scope of the works.
21.7 Accommodating the matrix of obligations in the JVA, the order and settlement agreement and the Castle Trust Deed.
21.8 The ongoing property market turbulence in the United Kingdom caused by Corona Virus pandemic, and
21.9 To achieve a clean break between the parties."
i) I accept the submission of PDL that the claim is a thinly disguised attempt to undermine the DMA Order, in particular the declaration made by the Deputy Master as to the construction of clause 7 of the JVA, contrary to the doctrine of res judicata. The premise of the claim is that an expert will be entitled to determine the appropriate distribution of the sale proceeds, having identified and had regard to the considerations which he considers appropriate. Yet that question is determined by clause 7 of the JVA, the correct interpretation of which was decided by the Deputy Master Arkush. GLL was quite clear about its intentions in legal submissions before me, arguing (see §17 of GLL's Skeleton Argument):
"The order of DMA cannot possibly be binding upon a Judge of the Technology and Construction Court; not only was it wholly unreasoned .. but it also flies completely in the face of commercial reality, reasonable linguistic analysis and any semblance of good sense."
It would not be permissible for a Court at the trial of the claim to re-open the question of construction of clause 7 of the JVA which has been determined by Deputy Master Arkush. As noted above, GLL commenced an appeal against the DMA Order but did not pursue it to a conclusion. The Order compromising the appeal against it did not in any way undermine the DMA Order (and, for good measure, a declaration to that effect was contained in the Order of Miles J dated 12 May 2021 relating to the contempt proceedings against Mr Ul Haq). Accordingly, the DMA Order is binding upon the parties as to the matters which it determines. It cannot be undermined by GLL commencing fresh proceedings in the TCC.
ii) Nor can the DMA Order be undermined by GLL referring to an expert the matters of construction of clause 7 of the JVA which have already been determined by Deputy Master Arkush (still less by the Court ordering or declaring that that should be done). A referral to an expert of matters which have already been the subject of binding determination by the Courts is either impliedly prohibited by the dispute resolution procedure or would be pointless because any decision by the expert which departed from that of the Courts would be in error of law (and so challengeable in the Courts pursuant to the terms of clause 8 of the JVA). Either way, GLL's claim that the Court should direct a referral to an independent expert of the question of the appropriate distribution of sale proceeds cannot succeed.
iii) I understand that notwithstanding GLL's claim that an expert should be appointed to determine issues regarding the scheme of distribution of sale proceeds, it has already purported to appoint an expert (see §27 of the second witness statement of Sajid Khan of PDL). Even assuming that this were a valid appointment, to determine a dispute which it was open to the expert to determine, it would be for the expert to make a ruling on the dispute, which ruling would be final save in the case of failure to observe the procedure in clause 8 or of error of law or material fact. There would be no legal basis for the Court to intervene before a decision had been taken in order to lay down the issues which must be considered by the expert. No specific cause of action is identified in the Particulars of Claim, still less one which would permit the Court to influence the expert's decision before it is made by identifying the issues which the expert should take into consideration.
iv) Even if the exercise called for by the claim were in principle legitimate, there is no realistic prospect that the Court at trial would direct the expert to determine the appropriate distribution of sale proceeds having regard to the list of issues set out in §21 of the Particulars of Claim. Those issues do not even include, still less give priority to, clause 7 of the JVA, which must on any view be the starting point, if not also the end point, of that exercise.
The counterclaim
The claim for provision of accounting information
"Throughout the period of the Scheme and upon completion of the sale of the Dwelling at [GLL]'s expense to provide [PDL] with such accounting information in relation to the Scheme and the sale of the Dwelling as [PDL] shall reasonably require."
i) Copies of all tenancy agreements granted by GLL in relation to the flats in the Property (the "Dwellings", as defined in the JVA).
ii) GLL's bank statements from 25 November 2021 to the date of my Order disposing of the application.
iii) The loan agreement dated 29 July 2016 with Assetz Capital Trust Company Limited ("Assetz") to which a legal charge dated 29 July 2016 refers.
iv) The facility letter dated 12 September 2019 made between GLL and Goldberg Homes Limited to which the Mortgage Deed dated 5 December 2019 granted by GLL to Goldberg Homes Limited refers.
v) Copies of any written loan agreements made between GLL and the following people/entities: S Bukhare, S Patel, E Ul Haq, Pyramid Properties (GB) Limited, Goldberg Properties Limited, Imram Quadar, Iram Shah, M Patel and Monolith Developments Limited. If and to the extent that GLL contend that there were any loan agreements made orally with any of those people/entities, details of their term, their repayment terms, any interest payable under them and the balance currently owing under them.
vi) Documentary evidence to explain the nature of the expenditure which GLL's bank statements refer to as payments to "Goldberg Credit CR". This seems to me to be "accounting information" in circumstances where core accounting documentation such as bank statements and the accounts themselves do not explain the basis for significant payments made by GLL.
vii) Copies of the full accounts prepared by GLL for the financial years from 2016 to 2022 (other than those for the financial year ending 28 September 2018, which have already been provided). I was informed that only abbreviated accounts were available via the Companies House website.
viii) Information to identify the creditor referred to as "Provision Court Order" referred to as being owed £1m in GLL's abbreviated accounts for the years ending in September 2019 and September 2020.
I do not direct the disclosure of copies of the building contracts, sub-contracts, professional appointments and any other agreements relating to the development of [the Property]" under which GLL sub-contracted the construction works to Goldberg Homes Limited. This category of documents seems to me to go beyond "accounting information" to which PDL is entitled.
The claim for an order for sale of the Property
"An order that the Property is to be sold forthwith, that the Defendant shall have conduct of the sale and that the sale proceeds are to be distributed in accordance with clause 7 of the JVA as construed by Deputy Master Arkush, namely as follows:27.2.1 In repayment of the Castle Trust Capital Plc charge and in meeting the costs of sale;
27.2.2 The sum of £1,050,000 to the Defendant;
27.2.3 The sum of £148, 067.51 to the Defendant;
27.2.4 An agreed provision for Corporation Tax (if any);
27.2.5 A further sum to the Defendant equivalent to 50% of sales profit after deduction of the Claimant's development costs subject to a cap of £4m;
27.2.6 The payment of the balance (if any) to the Claimant."
"5.1 The conduct of the sale of the Dwellings shall rest with Goldberg who shall appoint a reputable agent to be the selling agent for the Dwellings.5.2 The Dwellings in the Property shall be marketed at a price that Goldberg and Primelodge and the appointed selling agent consider to be the market value (each acting reasonably) and which would be likely to result in a sale being agreed within [three/six] months.
5.3 The conveyancing in relation to the sale of the Property shall be carried out by Primelodge's Solicitors."
Other claims made by PDL
"To the extent that the sums charged against the Property by the Claimant exceed the cap of £4m, an order pursuant to clause 12.7 of the JVA requiring the Claimant to indemnify the Defendant for the balance."
"Goldberg shall fully and effectively indemnify Primelodge for all costs (professional and otherwise), penalties, taxes, fees and liabilities incurred in relation to this Agreement and the obligations or liabilities arising from it over and beyond Primelodge's contribution of £2,000,000"
Conclusion