The High Court in London has ruled in favour of New Zealand businessman and philanthropist Sir Owen Glenn in the long-running Spartan litigation.
Toby Graham and Tom McPhail of Farrer & Co., together with a counsel team from Serle Court acted for Sir Owen and one of his companies at a 3-month trial last year. The 376-page judgement ends years of litigation against fellow New Zealander Eric Watson.
The case related primarily to a joint venture between Sir Owen and Mr Watson called Project Spartan. Sir Owen put forward a company called Kea Investments Ltd to invest £129 million in this venture, while Mr Watson put forward a trust run by Novatrust Ltd. The dispute arose in 2012, and was focused on a trustee and protector of two trusts Sir Owen had settled, one of which owned Kea.
Slowly, Sir Owen began to discover the issues with Project Spartan and litigation began in 2014 with Kea applying to wind up Spartan Capital Ltd and Novatrust launching a derivative claim.
The derivative claim and winding up petition were settled in a mid-trial settlement with Novatrust, but the remaining set of proceedings continued against Mr Watson.
The judge ruled that Kea was entitled to set aside the Project Spartan agreements on three different grounds: that they had been induced by fraudulent misrepresentations; that Mr Watson’s offer to obtain a training contract for a corporate trustee - Peter Dickson’s - daughter were sufficient to give rise to a realistic possibility of a conflict of interest and engaged the rules against bribes and secret commissions; and that Mr Watson owed fiduciary duties to Kea and acted in breach of those duties by arranging to make undisclosed profits from Project Spartan.
Mr Justice Nugee’s judgement also covered another joint venture known as Project Edsel, from which Mr Watson gained side profits. Although the judge agreed that Mr Watson had not given full disclosure of his side profit, he considered that on Project Edsel, unlike on Project Spartan, Mr Watson owed no relevant fiduciary duty to Kea.
The judgment is notable for its discussion of various areas of law, including: deceit; venturers owing fiduciary duties to each other and the scope of these; the limits of the law of bribery and secret commissions; company directors’ duty to act for proper purposes; tracing; and the rights of a claimant who settles with one defendant to allocate sums recovered under the settlement to particular claims.
Commenting on the judgment, Sir Owen said: “I regard this judgment as a complete vindication of my position in this complex and long-running litigation. Eric Watson has behaved appallingly. I saw him as a close friend but he was trying to rip me off. Once I knew what had happened I was determined to get justice.”
Mr Graham said: “We are delighted to have assisted Sir Owen in achieving justice – given the number of documents, the range of very complex issues and the scale of the task of preparing pleadings, witness statements and even regular inter-solicitor correspondence, it has at times seemed like the struggle with Leviathan.”
Consequentials are to be dealt with in September, which will include directions for the further pursuit of claims against Munil Development Inc., which received over £12 million of the money Kea invested into Project Spartan and the rate by reference to which Kea’s equitable compensation for breach of fiduciary duty should be calculated.
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