IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Court of Justice
7th December 2000

Before:

KEVIN GARNETT QC (SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)

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ANDREW PETER HOOPER

-v-

STEPHEN GORVIN

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D Crowley (instructed by Beachcroft Wansboroughs) for the Claimants
D Parry (instructed by Harold G Walker & Co) for the Defendant

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KEVIN GARNETT QC

1. In Poole in Dorset there is an industrial estate at 25/27 Willis Way known as the Waterside Estate (“the Estate”). It consists of 13 separate units and associated access and parking areas. These units are let on a variety of leases. In 1995, the Defendant, Mr Gorvin, who was a tenant of one of the units, purchased the freehold of the estate and thus the reversions of the various leases. In this action the tenants of a number of the other units seek relief on the basis, in effect, that Mr Gorvin holds the freehold on trust for them. For the reasons given below, the action succeeds.

The background

2. In 1994, and before the events which give rise to the dispute in this action, the freehold of the Estate was owned by Urban and City Properties Ltd. The Estate had been built on a landfill site and there were subsidence problems in relation to the car parking area. The state of the car park affected the amenity value of the site and was a matter of real concern to the tenants. Various estimates had been obtained for the works required to remedy the problem, ranging from £0.5m to deal with it properly to about £85,000 to achieve a short-term “fix”.

3. The tenants were liable to pay a service charge under the terms of their leases and the amount of this charge had become a highly contentious issue between the tenants and their landlord and its managing agents, not least because of the amounts charged in relation to the car parking area and the lack of any action taken to deal with the problem. Bailiffs had been instructed by the landlords on a number of occasions to try and collect arrears.

4. The tenants had formed themselves into a group (“the Action Group”) to coordinate their dealings with their landlord and appointed one person to act as their spokesman. Initially, this was one of the Claimants, Mr Coulling, but his business took him away from the Estate and in about March 1993 Mr Gorvin became their spokesman. His responsibilities included acting as a link between the tenants and the managing agents, collecting contributions from the tenants for the service charges and paying them over. He had no authority, however, to commit the tenants to any particular course of action and when any decision was required a meeting of the tenants was called by him. By 1994, the tenants were contemplating taking proceedings against the landlord to challenge the amount of the service charges and Mr Gorvin became responsible for coordinating this aspect of their dealings with the Action Group’s solicitor, Mr Alan Turle of Richards and Morgan.

5. At this stage I should set out the various parties and their respective interests in the Units as matters stood in the autumn of 1994:

 6. The following things should be noted about this summary:

1. The leases varied: there were six 999-year leases, four 21-year leases and one lease of one year. The sizes of the Units and the rents varied.

2. Two units were vacant. The evidence is that they were in a dilapidated state.

3. Mr Cheeseman, the tenant of Units G and H was a member of the Action Group at the time but has since left the Estate. He is not a Claimant.

4. Adams Morley Ltd, although still holding under a lease, had in fact left the site and their units were unoccupied. They were not members of the Action Group and are not Claimants.

5. Mr Fay had only a short lease and was not a member of the Action Group and is not a Claimant. The evidence is that he was not expecting to stay on the Estate.

6. There were thus seven interests represented by the Action Group, which accounted for eight of the Units (Mr Cheeseman had two). Two Units were vacant and a further two unoccupied although tenanted. One Unit (Mr Fay’s) was subject to a very short interest.

The October meeting

7. By October 1994, the members of the Action Group were ready to commence proceedings against the landlord, and Mr Turle asked Mr Gorvin to call a meeting so that he could have proper instructions to act for the proposed claimants. Mr Gorvin duly sent a letter to them on 21 October 1994 calling a meeting in his office for Tuesday 25 October.

8. This meeting (“the October meeting”) is the first of three about which there is a dispute in this action. At this stage I will merely set out the rival contentions. Mr Gorvin says the business was the proposed proceedings against the landlord, and instructions were given to Mr Turle to launch them. The pleadings in those proceedings show that a declaration was sought that the service charges which had been demanded were neither fair, nor reasonable in amount nor reasonably incurred, and were not recoverable under the terms of the leases. Representatives from all the interested parties in the Action Group were present, although Mr Gorvin could not remember which ones.

9. Mr Gorvin also says, however, that at the end of the meeting he raised another matter, which was that he had received some sales particulars for the freehold of the Estate from the sales department of the landlord’s managing agents, Messrs Goadsby & Harding. In fact it had clearly been common knowledge for some time that the landlord was in some financial difficulty and that a sale of the freehold was in the air. The particulars invited offers in the region of £250,000. They also noted that it is

evident from inspection that the parking forecourt has suffered from subsidence and remedial works will be necessary.

10. Mr Gorvin says that he raised the matter of the proposed sale and asked if others were interested. His main idea was to try and get rid of the landlord and its managing agents of whom everyone, and particular Mr Gorvin, was by now wholeheartedly sick. Mr Gorvin states that some of the others did express some interest, not of buying the freehold, but of “buying” other Units. In particular, Mr Hooper and Carpenter in Unit A, Mr Stacey and Mr Cooke in Unit B, and Mr Coulling in Unit D all wanted more space and were all interested in buying an extra Unit. The others were not sure if they wanted to do so. Mr Gorvin’s evidence is that he told the others he would make an approach to the agents on the basis that some wanted to buy some of the Units and that he would buy “the remainder”. In order to explain this evidence, I should say that is clear from the evidence that Mr Gorvin and indeed the others thought of the 999 year leases as being freeholds and only the shorter leases as being “leases”. Mr Gorvin’s thinking at this stage was therefore that the “freehold” which was being offered for sale consisted of seven Units, since the other six were let on 999 year leases. Those let on 21-year or shorter leases were to be regarded as roughly equivalent in value to those which were vacant since they were let at rack rents. The other property comprised in the freehold, such as the car parking areas, was discounted for this purpose. Hence the way in which he says he was going to frame his proposal: the “freehold” consisted of 7 Units; there was interest from some of the other tenants in “buying” some of these Units in addition to the ones they already owned; he would “buy” those Units which they did not want. Although he did not say so in his witness statement, he said in his supplementary evidence in chief that there was also some discussion about the price at this meeting. On the basis that some reduction could be obtained on the asking price, the cost of each Unit would be about £32,000, ie one-seventh of the asking price.

11. Mr Gorvin accepts that this discussion was at the end of the meeting and was very tentative.

12. For the Claimants, it is accepted that there probably was a meeting in late October to discuss the proceedings against the landlords at which the various members of the Action Group were represented. None of their witnesses has any real recollection of it, however, and no one has any recollection of any mention of the freehold being for sale, or of any discussion about buying it.

Mr Gorvin approaches the agents

13. Mr Gorvin’s evidence is that he then approached the agents with his proposal. After taking instructions, however, they rejected the approach. They were not interested in selling off the freehold in pieces. They were only interested in selling the freehold as a whole to one purchaser.

The November meeting

14. Mr Gorvin says that after this response he called a meeting a few days later, in early November, to discuss the situation. This (“the November meeting”) is the second meeting about which there is a dispute. It again took place in Mr Gorvin’s office. Again, I shall for the moment simply state what the evidence of each side was about the meeting.

15. For the Claimants, those who say they were present at the meeting were Mr Coulling, Mr Allen, Mrs Allen (who although not a leaseholder was Mr Allen’s business partner), Mr Cooke, Mr Drake (on behalf of Mr Wishart and Mr Gibson), Mr Wishart, and Mr Carpenter. Mr Gorvin told them that the freehold was for sale for about £240,000 and that the agents were only willing to deal with one purchaser. There was then a long discussion about joining together to buy the freehold and how this would then be managed, whether through some kind of partnership or a management company. There was general concern about the liability for the work which was needed to the car-park. There was discussion about doing up the vacant Units and selling or letting them and using the proceeds and other rents to fund work on the car-park. Since there were seven interest groups, the price would be divided seven ways, which amounted to about £32,000 each, depending on the final price. This was something which each of them could afford. There was no concluded agreement about what should happen after the purchase: that would have to be worked out later. It seems to have been considered that since each of their Units was different in size and value, there would also have to be some adjustment in their respective interests in the freehold from a strict one-seventh share, and the price which they had paid, to reflect this. Who would have any of the extra Units which were available was again left to be worked out later.

16. At the end of the meeting it was agreed that an attempt would be made to buy the freehold on behalf of the Action Group on the basis that each Unit represented in the Action Group would contribute equally to the purchase price. Their evidence is that Mr Gorvin suggested that he make the approach and try and negotiate a price. Since he was already their spokesman, they agreed.

17. Mr Gorvin on the other hand says that he explained to the meeting what the response of the agents had been, and there was then a long and inconclusive discussion about what should be done. Mr Gorvin took a back-seat in all this and does not really dispute that many of the matters referred to in the Claimants’ evidence were discussed but in the end he says that there was no agreement at all about what should be done. However, he didn’t want to let the opportunity pass and so he said that he would try and buy the freehold for himself and, if he did, he would grant leases of available Units to those who wanted one. There was no objection to this and indeed there was a sense of relief since it would get rid of the uncertainty which existed.

Events between November 1994 and February 1995: Mr Gorvin’s perspective

18. What happened next depends upon the perspective of the various witnesses. As to Mr Gorvin, he states that shortly after the meeting he made an offer on his own behalf for the freehold of £175,000, which was accepted. There then followed conveyancing negotiations which were complicated because he was anxious that if he bought the freehold he should acquire all the various outstanding interests, for example, Adams Morely Ltd’s lease and any rights of the management company to rent arrears, etc, such that he would be in as complete control of the Estate as possible.

19. From time to time he was asked by other members of the Action Group how things were going to which he said, slowly. He didn’t tell them he had actually agreed to buy the property because, he said, it was none of their business. One of the tenants, Mr Cooke, had approached him with an offer of money to secure Unit C, next door to his existing Unit. Mr Gorvin says his response was that he would sell Mr Cooke a long lease if and when he purchased the Estate.

20. By January 1995 these negotiations had reached the point that he had been give a deadline to complete the purchase by 26 January 1995, subsequently extended to the 27th.

21. On that day, however, his solicitor told him that the Action Group had won their case against the landlord, in the sense that it had failed to defend the proceedings and judgment in default had been entered on 20 January 1995. Mr Gorvin says that although he was pleased with this result from the Action Group’s point of view, he was also very concerned from his personal point of view because the effect of the judgment seemed to him to be that no service charges were recoverable from the tenants. He did not want to be in the position of being the freeholder without being able to collect service charges. In fact this was not the effect of the judgment, which was merely that the actual service charges which had been demanded by the landlord were not recoverable. Nevertheless, he instructed his solicitor to withdraw from the sale on the same day.

22. On 27 January he also dictated a letter to go out to the other tenants in which he said the following:

Just a quick letter to advise you of the outcome of our court action – We won!...
This creates a new situation with regard to the proposed purchase of the Estate.
I recommend that we all meet to discuss our next course of action and also the future management of the site.
Can I suggest that we convene at my yard on Thursday 2nd February 1995 at 5.30 pm to review our current circumstances.

Mr Gorvin’s evidence was that the “proposed purchase” referred to his proposed purchase of the freehold.

Events between November 1994 and February 1995: the Claimants’ perspective

23. From the Claimants’ side, Mr Coulling says he telephoned Mr Gorvin the day after the November meeting to say that his share of the money was in place. Mr Hooper says he saw Mr Gorvin about two days after the November meeting and also told him that their portion of the purchase price would be in place. Mr Cooke says he did much the same thing. Mr Wishart says that he had initial discussions with his bankers to arrange a mortgage to raise their share of the purchase price.

24. Other witnesses, namely Mr Allen and Mr Cooke, say that over the next few weeks they were anxious to know from Mr Gorvin how matters were proceeding. Mr Gorvin said that he was still negotiating with the landlords. Mr Drake says he ran into Mr Gorvin before Christmas who told him that the deal was still progressing but that there were problems.

25. The next thing which happened was that they received Mr Gorvin’s letter of 27 January 1995.

The February meeting

26. The meeting convened by Mr Gorvin for 2 February 1995 (“the February meeting”) duly took place on that day and is the third meeting about which there is an acute conflict of evidence. Mr Gorvin’s account is that he told the meeting that he had decided not to go ahead with the purchase since the effect of the judgment would be that he could not collect service charges. No one at the meeting was sure what to do next. There was some discussion about collection of the arrears of contributions to the Action Group’s fighting fund. There may have been some disappointment at the outcome but nothing more.

27. The Claimants’ account is completely different. Those present were Mr Coulling’s son, Lee (who did not give evidence), Mr Allen, Mrs Allen, Mr Cooke, Mr Drake and Mr Hooper. The evidence does not reveal whether Mr Cheeseman was also present. The account of those present is that Mr Gorvin announced to them that he had purchased the freehold and was their new landlord. There followed a heated argument lead by Mr Allen. The overall reaction at the meeting was variously described by the Claimants’ witnesses as follows: “the meeting seemed stunned”, “I was dumbfounded” (Mr Allen); “the meeting eventually closed amidst scenes of acrimony and disbelief” (Mr Cooke); I was “gobsmacked” (Mrs Allen); I thought “we had been stitched up”, “I could have strung him up” (Mr Hooper).

Subsequent events

28. Mr Gorvin says that after the meeting he reconsidered his decision not to purchase the Estate and thought that it might be viable if he could obtain it at a lower price. He discovered that it had in fact already been sold on to Fairmile Portfolio Management Ltd, and on 16 February 1995 he made an offer to buy the freehold from the new owners for £160,000. This was accepted and on 31 March 1995 the freehold was conveyed to him.

29. On 4 April 1995 he wrote to all the tenants, saying:

As you are no doubt aware, I have now acquired the freehold [of the Estate], warts and all.

30. Thereafter Mr Gorvin dealt with the Claimants as their landlord. The explanation which the Claimants give for not making any protest at the time, as they now do, is that they did not believe there was anything that they could do. It was only when Mr Coulling was discussing taking a lease of Units K and L in late 1995 with his solicitors that he realised that there might be a claim. His solicitors wrote a letter on 4 December 1995 to Mr Gorvin’s solicitors, who were dealing with the new lease, raising the matter amongst a number of other points, and “inviting” comments. The point was rejected on 6 December 1995.

31.Nothing further happened until 9 April 1998, when a letter before action was written on behalf of the Claimants. The claim was refuted in detail by Mr Gorvin’s solicitors on 23 April 1998. Even then, no proceedings were issued until 17 December 1999. At the end of closing speeches, an application was made to amend the Defence to plead laches, acquiescence and delay. This would have required further evidence and disclosure. I rejected it as being far too late.

The claims

32. The ways in which the case against Mr Gorvin is put are as follows:

1. At the November meeting it was agreed that the Action Group would form a partnership. The further details pleaded about the partnership are as follows:

(i) The partnership was formed in order to acquire and exploit the beneficial ownership of the Estate for the profit of each partner;

(ii) The business of the partnership commenced when Mr Gorvin was instructed to negotiate the purchase of the property;

(iii) The Action Group members would have an equal interest in the partnership, subject to contributing their respective shares of the purchase price.

2. Alternatively, at the main meeting it was orally agreed that:

(i) The Action Group would “pursue” the purchase of the Estate;

(ii) Mr Gorvin would act on their behalf in negotiating the purchase.

The consideration for this agreement was that the members of the Group other than Mr Gorvin agreed not to “pursue” the Estate while he did so on their behalf.

33. In the course of argument, this alternative claim was advanced either on the basis that at the November meeting Mr Gorvin was instructed, and agreed, to purchase the Estate on behalf of the Action Group, effectively at the best price he could obtain, or alternatively that he was instructed, and agreed, to conduct negotiations for the purchase of the freehold of the Estate by the action Group, that is, he did not have authority to enter into a contract on their behalf.

34. Whichever way the case is put, the result is said to be that Mr Gorvin holds the Estate on trust for himself and the other members.

Findings of fact

35. I now turn to deal with my findings of fact.

The October meeting

36. A meeting clearly occurred on 28 October 1994 at which representatives of all members of the Action Group were present. The purpose of calling this meeting was to give Mr Turle instructions for the proceedings against the landlord. I find that at the end of the meeting Mr Gorvin did briefly raise the matter of the freehold being put up for sale. I think that it is likely that he had already seen the sales particulars since he had clearly made contact with the agents by the time of the November meeting, only a few days later. Given this, I think it is inherently likely that he would have mentioned it. If there had been any detailed discussion about the matter, however, I think that those present would have remembered at least something about it, even if their overall recollection differed from Mr Gorvin’s. The collective absence of any recollection of any discussion about the matter indicates to me that nothing of substance was discussed, and I so find. I therefore reject Mr Gorvin’s more detailed account of what was discussed. To be fair to Mr Gorvin, he accepted that the matter was dealt with only briefly.

37. My conclusions about this meeting are not of real importance, however, because whatever may have been discussed was overtaken by what happened at the November meeting.

The November meeting

38. There is no dispute that in early November there was a meeting which lasted about an hour and a half at which the possible purchase of the freehold was discussed. As to the crucial question whether the upshot was that Mr Gorvin told the meeting that he would try to purchase the freehold on his own behalf or whether he agreed to negotiate terms on behalf of the Action Group, I prefer the evidence of the Claimants, for the following reasons:

1. I have of course heard and seen the various witnesses give evidence. I have tried to guard against coming down in the Claimants’ favour on this issue simply on the basis of their numerical superiority. As a whole, however, their evidence on this crucial point was convincing.

2. The difference between the Claimants and Mr Gorvin was not simply one of degree, for example, whether or not a concluded agreement was reached. There was a much fundamental divergence: on Mr Gorvin’s case, some of the other members of the Action Group merely wanted to buy an extra Unit; on the Claimants’ side, the desire was to buy the whole freehold. I consider that it is inherently probable that given the past problems with their landlord the Action Group should have wanted to seize the opportunity to control the Estate for themselves. I accept that the problem with subsidence in the car parking area was a major worry, but it would be reasonable for them to consider it preferable to be able to decide what to do for themselves rather than be at the mercy of a third party.

3. It was natural that Mr Gorvin should be chosen conduct negotiations, he being their existing spokesman and the person who had brought the matter to their notice and already made preliminary inquiries,

4. I accept that they all had the financial ability to contribute their share of the purchase price.

5. Crucially, as I will come on to explain, I accept their evidence that there was a major row at the February meeting. It is hard to see what the reason for the row could have been unless the Claimants’ representatives thought that Mr Gorvin had been going to act in their mutual interests and not his own. Mere disappointment that Mr Gorvin did not wish to proceed with his own purchase would not justify such a reaction.

6. If matters had been left on the basis that Mr Gorvin would try and buy the freehold and would then let further Units to those who wanted them, there would have been no need for any urgency in the others making sure they had the necessary finance in place. The evidence of some of the other members of the Group, however, which I accept, is that (a) they took urgent steps to secure the necessary finance and (b) the amount in question was about £32,000. Yet Mr Gorvin on his own evidence had said nothing about the price which he would ask for such leases.

7. Mr Gorvin’s evidence was that at the October meeting it had only been three of the tenants who were interested in taking some kind of further interest, namely (a) Mr Hooper and Mr Carpenter (b) Mr Stacey and Mr Cooke and (c) Mr Coulling. His evidence was also that these tenants maintained their interest at the main meeting. Yet the evidence of Mr Wishart, which was not challenged and which I accept, is that he and Mr Gibson also took steps to have in place the necessary finance. While the interest of the other three could be explained on the basis that they all wanted to expand and buy other units, hence their wish to pay £30,000 for the “freehold” of an extra Unit, the same was not said of Mr Wishart and Mr Gibson. His doing so can therefore only be explained on the basis that he also was one of those who wanted to buy a share of the freehold.

39. I do not accept, however, that there was any concluded agreement for a partnership or that Mr Gorvin was authorised to purchase the freehold of the Estate at the main meeting.

40. As to the question of partnership, it is clear, even on the Claimants’ own evidence, that this was a matter which was merely bandied about at the meeting as one way of managing the freehold if it was purchased. There were many matters of detail which still needed to be discussed and nothing was concluded. It was revealing that a number of witnesses (Mr Coulling, Mr Drake and Mr Wishart) said that they thought they were already in partnership with Mr Gorvin, that is, that the existing Action Group was a partnership. This was not argued to be the case by Mr Crowley, who appeared for the Claimants, and is an indication that the Claimants’ own perception of what constitutes a partnership, and what constitutes a partnership in law, differs.

41. There are other reasons why in my judgment no partnership was constituted at the main meeting. All that it is necessary for me to say is that in my judgment the members of the Action Group were not carrying on a business in common with a view to profit within the meaning of s 1(1) of the Partnership Act 1890. There was no intention to turn the freehold to profit, merely to acquire it to get rid of their existing landlord, to control their destiny and to improve their business surroundings.

42. As to whether Mr Gorvin was appointed as agent to purchase the freehold of the Estate on behalf of the Action Group, it would require clear evidence to be able to reach such a conclusion. First, I accept Mr Gorvin’s evidence when he said that he would not have considered entering into any commitment to purchase the Estate without having first received sufficient funds from the others. Second, and more to the point, the evidence of the Claimants itself does not in my judgment make out such a case, as can be seen from the following extracts from the witness statements, which stood as evidence in chief and which are as far as they go in dealing with the matter:

1. Mr Coulling:
“Mr Gorvin said that the landlord would only negotiate the sale with one person, and that he was willing to act for the group if we were prepared to proceed. Every person at that meeting confirmed that he was willing to proceed ...”

2. Mr Allen:
“... the suggestion was made that we attempt to acquire the freehold that was now available ... We decided that about £32,000 per unit would be required, and we instructed Mr Gorvin to proceed.”

3. Mr Cooke:
“A meeting was called and Mr Gorvin informed us that we would need to raise about £32,000 per unit. Thereafter he volunteered to handle negotiations with the landlord and act on our behalf, because the landlord had indicated that it would only deal with [one] person.”

4. Mr Drake:
“At that meeting it was suggested that the estate was for sale and it was agreed that the group would amalgamate and purchase it for ourselves, the funding required was to be about £30,000 per unit-holder. Mr Gorvin advised that the landlord would not negotiate the purchase with a group, and he offered to continue his representative capacity on our behalf.”

5. Mrs Allen:
“At that meeting it was unanimously agreed that the freehold would be acquired, and that all present would have [to] put up about £30,000 per unit to achieve this. Mr Gorvin told the meeting that the landlord would only negotiate with one party, and he proposed to attend to those negotiations on our behalf.”

6. Mr Wishart:
“The general agreement that arose from that discussion was that the landlord was in some financial difficulty and the freehold might be up for sale. We decided that it would be a good idea to acquire the property for ourselves.”

7. Mr Hooper:
“Mr Gorvin advised that the landlord was willing to ... sell the freehold, but that it would only negotiate with one person and not a group. Mr Gorvin then suggested that he would head the group and conduct the negotiations on our behalf.”

43. It is impossible to extract from that evidence a case that Mr Gorvin was authorised to commit the others to a contract to purchase the property. Admittedly, in the course of cross-examination some of the Claimants’ witnesses put the case rather higher. Nevertheless, I am satisfied that Mr Gorvin did not have the authority suggested. I think that Mr Gorvin was expected to negotiate terms for the purchase of the freehold and then bring these back to a further meeting.

The February meeting

44. Resolving what happened at this meeting is a puzzle. On the one hand, it is not disputed that on 27 January 1995, Mr Gorvin had pulled out of his proposed purchase. It is also not disputed that it was not until 16 February 1995 that he made an offer to purchase the freehold from the new owners. As is fairly said by Mr Parry, who appears on his behalf, how in those circumstances could he have said to the meeting on 2 February that he had purchased the freehold and was their new landlord?

45. I start by saying that I accept the evidence of the Claimants’ witnesses as to the general reaction of the meeting to whatever it was that Mr Gorvin said. The evidence was generally consistent and compelling. I am therefore left in really no doubt that something happened at that meeting to cause the reaction amongst those present which they described. What that something was could not have been the mere announcement by Mr Gorvin that he had pulled out of the purchase and that they were, in effect, back to square one. No other explanation has been put forward other than that Mr Gorvin had told them that he had purchased the freehold and was their new landlord. As much of a puzzle as this question is, therefore, I am driven to the conclusion that the Claimants’ overall account of what happened at the meeting is correct and I therefore reject Mr Gorvin’s account. It is a matter of speculation as to what the true position was so far as he was concerned, and particularly whether he still had hopes of buying the freehold and was trying to keep the other members of the Action Group out of the market. This seems, however, the most likely explanation.

A fiduciary duty?

46. My findings of fact leave as the only factual basis of the case the existence of an agreement by Mr Gorvin to negotiate on behalf of the Action Group for the purchase of the freehold of Estate, it being understood that if his negotiations were successful each group of interested tenants would contribute an equal one-seventh share of the purchase price. The present case obviously has some similarities with cases such as Chattock v Muller (1875) 8 Ch D 177 and Pallant v Morgan [1953] Ch 53, where in each case the plaintiff had refrained from bidding for certain property at auction on the basis that the defendant would bid for them jointly and they would then divide the property between them. Both cases were decided, however, on the basis that the defendant was acting both for himself and as agent for the plaintiff when bidding for the property, which is not the case here. In this case, the issue is whether the factual basis which I have set out gave rise to a fiduciary relationship between Mr Gorvin and the other members of the Group such that he owed a duty to them not to negotiate for and buy the freehold on his account.

47. There are of course established categories of cases in which a fiduciary duty arises, in particular: trustee and beneficiary; agent and principal; solicitor and client; partner and co-partner; and a director and his company. Mr Parry points out that Mr Gorvin was not an “agent” in the legal sense of that word. As is stated in Halsbury’s Laws of England, 4th ed, Volume 1(2), at para 1:

The terms ‘agency’ and ‘agent’ have in popular use a number of different meanings, but in law the word ‘agency’ is used to connote the relation which exists where one person has an authority or capacity to create legal relations between a person occupying the position of principal and third parties.

It is clear, however, that the categories of fiduciary relationships are not closed. The question is: what are the necessary characteristics of a fiduciary relationship? In White v Jones [1995] 2 AC 207, Lord Browne-Wilkinson said this, at p 728:

The paradigm of the circumstances in which equity will find a fiduciary relationship is where one party, A, has assumed to act in relation to the property or affairs of another, B.

Again, in Bristol and West Building Society v Mothew [1998] Ch 1, at p 18, Millett LJ, as he then was, said:

A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. The core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.

These statements are supported by the following passage from P D Finn’s classic work, Fiduciary Obligations (1977), at p 1:

[A fiduciary] is, simply, someone who undertakes to act for or on behalf of another on some particular matter or matters. That undertaking may be of a general character. It may be specific and limited. It is immaterial whether the undertaking is gratuitous. And the undertaking may be officiously assumed with request.

49. Mr Parry argues, however, that a fiduciary relationship will only arise where the fiduciary has agreed to act in return for good consideration or where the principal has acted to his detriment in reliance on the fiduciary’s agreement to act in the principal’s interests. For this he relies on Yaxley v Gotts [2000] Ch 162. That case, however, was concerned with whether an oral agreement for the grant of a lease of a flat in return for the carrying out of works to the building was enforceable in circumstances where the promisee had acted on the agreement by carrying out the works. The issue for the Court of Appeal was whether the agreement, although void and unenforceable by virtue of s 2 of the Law of Property (Miscellaneous Provisions) Act 1989, could nevertheless still be enforced on the basis of a constructive trust. The Court was not concerned with the question of whether a fiduciary relationship existed between the parties.

50. Nevertheless I accept that whether or not it was known to the alleged fiduciary that the principal would act to his detriment in reliance on the agreement reached is a relevant factor in assessing whether the relationship was a fiduciary one. It cannot be determinative, however. A trustee stands in a fiduciary relationship to the beneficiaries even though they have not acted in reliance. In the case of unborn children this would clearly be impossible. Nevertheless, the point is obviously of more significance in a commercial context, when the court should perhaps be more cautious to find a fiduciary relationship arising between men and women of business if the case falls outside the established categories. Whether the “fiduciary” was to receive consideration for what he was to do is of much lesser, if any, significance.

51. In the present case, in my judgment Mr Gorvin did assume fiduciary obligations to other members of the Action Group, for the following reasons:

1. He was already acting as spokesman and intermediary for the Action Group and in that capacity the others had relied on him to a limited extent to act in their interests.

2. On my findings of fact, the agreement reached at the November meeting was that an attempt would be made to buy the Freehold on behalf of the members of the Action Group.

3. The negotiations to buy the freehold clearly had to be carried out by someone on behalf of the Action Group, and Mr Gorvin was nominated to be that person. I am satisfied that if Mr Gorvin had not suggested himself or had been unwilling to act, then someone else would have been nominated.

4. Further, I am satisfied that if Mr Gorvin had told the meeting that he did not want to participate in a joint purchase, or intended to try and purchase the freehold for himself, the others would have attempted to purchase it themselves. To that extent, therefore, the other members of the Action Group acted to their detriment.

5. The upshot of the meeting was therefore that the other members of Action Group expected and trusted Mr Gorvin to act in their collective interests and not his own.

52. It follows that Mr Gorvin acted in breach of his fiduciary duty in negotiating and purchasing the freehold of the Estate on his own account.

53. Mr Parry also argues that any fiduciary duty which there might have been came to an end at the February meeting, since on that date Mr Gorvin made it clear that he was no longer intending to purchase the freehold. I have, however, rejected Mr Gorvin’s version of what happened at that meeting. His announcement that he had already bought the freehold could not relieve him of his existing duty, which he breached shortly afterwards.

54. It is not suggested by Mr Parry that if a breach of fiduciary duty is established then the result is anything other than Mr Gorvin holds the property on trust for the Claimants, subject to being paid the appropriate proportion of the purchase price. As to this, Mr Cheeseman has made no claim in this action but, again, it has not been suggested that this can affect the result. As to what should happen, on the one hand Mr Gorvin should be entitled, if he wishes to, to receive nothing less than the six-sevenths of the purchase price which was agreed. This would require some adjustment in relation to the parties’ interests. On the other hand, he should be entitled, if he wishes, to be in a position of equality with the other Claimants, this also being the basis of the agreement. In this case he should be entitled to receive five-sixths of the purchase price, the parties becoming tenants in common in one-sixth shares. I will hear the parties as to the preferred course of action.

55. Again, it has not been suggested that the fact that there was no concluded agreement as to how the freehold should be dealt with, if it was purchased on behalf of the Action Group, affects the result in the case of my finding a breach of fiduciary duty. If the parties cannot agree how the freehold should be dealt with, presumably it will have to be sold. This was the position in Pallant v Morgan [1953] Ch 53, where the court refused specific performance of the agreement between the parties on the grounds that there was no concluded agreement as to the division of the property but held that it was nevertheless held by the defendant for him and the plaintiff in equal shares and that, if necessary, it should be sold.

56. Finally, some form of accounts or inquiries will be necessary in the light of the various dealings which there have clearly been with the freehold since Mr Gorvin acquired it. Again, I will hear counsel as to the appropriate form of order.

Judgment for the claimants.