Russell v Cartwright & Ors

Factual and Procedural Background

This opinion concerns a claim by the Plaintiff against three Defendants relating to a property development joint venture business known as "Hub," which the four principals were involved in from 2011 until the Plaintiff's departure in July 2014. The claim arises from the Plaintiff's departure, documented principally by a Settlement Deed dated 1 July 2014. The Plaintiff alleges breaches of contractual terms and fiduciary duties, fraudulent non-disclosure, and unlawful means conspiracy related to exclusion from a development project in Wembley shortly after his departure. The Defendants deny these claims and counterclaim that the proceedings breach the Settlement Deed, seeking indemnity costs. This decision follows the first stage of a split trial addressing liability and the basis for damages.

Legal Issues Presented

1. Whether the Defendants breached express or implied contractual or fiduciary duties owed to the Plaintiff in relation to disclosure and participation in the Wembley project.
2. Whether the Defendants committed fraudulent non-disclosure or fraudulent misrepresentation by withholding information about the Wembley project.
3. Whether the Defendants engaged in an unlawful means conspiracy to exclude the Plaintiff from the Wembley project.
4. The effect of the release provisions in the Settlement Deed on the Plaintiff's claims, particularly concerning fraud or dishonesty.
5. The existence and effect of the so-called "Hub 2 agreement" between the Plaintiff and one Defendant concerning information sharing post-departure.
6. The appropriate outcome of the Defendants' counterclaim for costs on the indemnity basis pursuant to the Settlement Deed.

Arguments of the Parties

Plaintiff's Arguments

• The Defendants breached express and implied duties of good faith, fair dealing, and fiduciary obligations by failing to disclose the Wembley project and excluding the Plaintiff dishonestly.
• There was fraudulent non-disclosure based on a duty to disclose and correct misunderstandings, supported by the case HIH Casualty v Chase Manhattan Bank [2003] 1 All ER 349.
• Alternatively, the Defendants conspired unlawfully by dishonest means to exclude the Plaintiff from the Wembley project.
• The Plaintiff would not have entered the Settlement Deed had he known about the Wembley project or would have rescinded it on grounds of fraudulent misrepresentation.
• The Plaintiff submitted that the Defendants were aware of their duties and acted dishonestly in withholding the Wembley transaction information.

Defendants' Arguments

• There was no breach of duty, fraud, or dishonesty by the Defendants.
• The claims for breach of duty were pleaded as intentional rather than fraudulent, and fraudulent non-disclosure does not give rise to a damages claim.
• The Settlement Deed released all claims except those based on fraud or dishonesty.
• The "Hub 2 agreement" reflected the Plaintiff's expressed desire to receive information only about certain projects (the Kew projects) and not others, including Wembley.
• The Defendants maintained that no instruction was given to staff to withhold information from the Plaintiff and that he could have obtained information if requested.
• The Defendants counterclaimed for costs on the indemnity basis due to the Plaintiff's breach of the Settlement Deed by bringing these proceedings.

Table of Precedents Cited

Court's Reasoning and Analysis

The court conducted a detailed factual and evidential analysis, including assessment of witness credibility. The Plaintiff was found to be an unsatisfactory and unreliable witness, with evasive and inconsistent evidence. The Defendants' witnesses were generally found to be straightforward and honest.

The court examined the nature of the relationship between the principals and concluded that no fiduciary relationship existed, as the parties were shareholders rather than partners, and the relationship lacked the requisite trust and confidence characteristic of fiduciary duties. The court relied on leading authorities to clarify that fiduciary duties require discretionary authority and loyalty, which were absent.

Regarding the Framework Joint Venture Agreement (FJVA), the court found that express good faith obligations existed but were limited in scope and were not breached. The court rejected the implication of broader good faith or disclosure duties, noting the detailed contractual provisions and the informal business practices. The court emphasized that the Plaintiff had chosen not to participate actively after indicating his departure and had limited his interest to certain projects.

The Settlement Deed contained comprehensive release provisions extinguishing claims except those based on fraud or dishonesty. The court accepted the Defendants' concession that fraud-based claims were not released but found no evidence of fraud or dishonesty.

The "Hub 2 agreement" was found to be an arrangement relating to email distribution and information sharing, reflecting the Plaintiff's expressed desire to receive information only on specific projects. The Plaintiff did not request information on other projects and was not prevented from doing so. The Defendants were not under a duty to volunteer information about the Wembley project.

The court rejected allegations of dishonesty regarding communications with solicitors and the content of proof of funds letters, finding no credible basis for such claims and emphasizing the professional conduct of third parties involved.

Applying the test for dishonesty from Ivey v Genting Casinos, the court found no awareness of any duty to disclose on the part of the Defendants and no dishonesty by objective standards.

Consequently, the Plaintiff's claims for breach of duty, fraudulent non-disclosure, and unlawful means conspiracy failed. The Defendants' counterclaim for breach of the Settlement Deed was upheld, entitling them to indemnity costs.

Holding and Implications

The court DISMISSED the Plaintiff's claims in their entirety, finding no breach of duty, fraud, or conspiracy. The Defendants' counterclaim succeeded, and the Plaintiff was ordered to pay the Defendants' costs on an indemnity basis pursuant to the Settlement Deed.

The direct effect is that the Plaintiff obtains no relief and is liable for the Defendants' costs. No new legal precedent was established, and the decision primarily applies existing principles concerning joint venture relationships, fiduciary duties, contractual good faith, and the enforcement of settlement release provisions.