Neutral Citation Number: [2012] EWHC 2487 (Ch)
Case No: HC09C00596
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 06/09/2012

Before :

MR JUSTICE MORGAN
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Between :

	(1) ROSS RIVER LIMITED
(2) BLUE RIVER LIMITED PARTNERSHIP	Claimants	
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	(1) WAVELEY COMMERCIAL LIMITED
(2) PETER BARNETT
(3) PAUL HARNEY
(4) WESTBURY PROPERTIES LIMITED	Defendants	

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Mr David Caplan (instructed by Mischon de Reya) for the Claimants
Mr Piers Hill (instructed on Public Access) for the Second Defendant

Hearing dates: 19th and 20th June 2012
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Judgment

Mr Justice Morgan: 
Introduction
1.	This judgment deals with certain matters arising out of the judgment which I handed down in this action on 25th January 2012, the neutral citation of which is [2012] EWHC 81 (Ch). In this present judgment I will adopt the definitions which I used in the earlier judgment. I will also assume that anyone who wishes to follow the reasoning in this present judgment will have available the earlier judgment. Thus, I will not restate all of the many matters which were considered in the earlier judgment although I may need to refer to some matters which I then decided in order to explain the reasons for my further conclusions. 
2.	On 17th February 2012, I ordered WCL to make an interim payment of £1,000,000 to Ross River. WCL did not pay any part of that sum. On 21st March 2012, Ross River presented a petition for the winding up of WCL and on 14th May 2012 the Registrar ordered that WCL be wound up. On 19th June 2012, pursuant to section 130(2) of the Insolvency Act 1986, I granted leave to Ross River to continue the present action against WCL. 
3.	The two principal matters with which I will deal in this judgment are: (1) the amount of the Net Profits pursuant to the JVA and (2) the possible liability of Mr Barnett to pay a sum to Ross River by way of equitable compensation for alleged breaches of fiduciary duties which he owed to Ross River.
The Net Profits
4.	I can take the first of these matters shortly. Following my earlier judgment, I was provided with a supplementary expert report by Mr Davidson, the expert instructed on behalf of Ross River. Mr Davidson had calculated the amount of Net Profits in accordance with the JVA and in accordance with the detailed conclusions set out in my earlier judgment. I was not provided with any further evidence by any expert instructed by WCL or Mr Barnett. Mr Davidson’s conclusions as set out in his supplementary expert report were not the subject of any criticism by counsel instructed by Mr Barnett. Accordingly, I accept Mr Davidson’s conclusions. I hold that the amount of Net Profits in accordance with the JVA was £1,209,815. 
5.	In accordance with the agreement that Ross River would receive 40% of Net Profits, and in accordance with WCL’s liability to pay a further sum to Ross River pursuant to the side agreement, the sum payable by WCL to Ross River is £1,043,926. As explained in my earlier judgment, the simplest way to arrive at the sum payable by WCL to Ross River, now that the figure for Net Profits is established, is to take 40% of that figure and add £560,000 (i.e. £325,000 + £235,000) to it, rather than arriving at the same answer by doing the calculation in the more complicated way directed by the terms of the side agreement. That means that out of the Net Profits of £1,209,815, WCL is entitled to retain the balance of £165,889.
6.	WCL is now in insolvent liquidation. That fact does not affect its legal liability to pay the sum of £1,043,926 to Ross River. However, the insolvency of WCL may have a bearing on the next matter with which I will deal in this judgment, namely, the possible liability of Mr Barnett for alleged breach of fiduciary duty. I will deal with the implications of WCL’s insolvency, in that context, later in this judgment. 
Mr Barnett’s position: the background
7.	I now turn to the second matter, namely, the possible liability of Mr Barnett to pay a sum to Ross River by way of equitable compensation for alleged breaches of fiduciary duties which he owed to Ross River. At paragraph 263 of my earlier judgment, I held that Mr Barnett owed fiduciary duties to Ross River. These duties were a duty of good faith and a duty not to do anything in relation to the handling of the joint venture revenues which favoured himself to the disadvantage of Ross River. I explained that a reference to “favouring himself” included a case where the party favoured by him was a company controlled by him or in which he had a substantial interest. I also explained that his fiduciary duties extended not only to protect Ross River’s rights to payment under the original JVA but also to payment of the sums due to Ross River under the side agreement.
8.	Between paragraphs 264 and 279 of my earlier judgment, I addressed the question whether Ross River had established that Mr Barnett had committed a breach of his fiduciary duties. I commented that I had received very little assistance from the parties in the course of the trial in answering that question. That was because Ross River had made unrealistic submissions as to the position and because Mr Barnett had given inconsistent evidence on a number of matters and, in any event, I held that I had to be very cautious about any of the evidence which he gave. At paragraph 266 of my earlier judgment, I commented that the difficulty of deciding the question was increased by the fact that Ross River had failed to ask the right question and had failed to adduce evidence directed to answering that question. 
9.	I then considered the evidence which I had as to what WCL ought reasonably to have considered from time to time would be the likely outcome of the development and the resulting sum payable to Ross River and the resulting sum which could be retained by WCL. I then considered the evidence which I had as to the sums which WCL had paid to connected parties otherwise than for joint venture purposes. In the course of that consideration, I referred to a point which divided the parties as to the right response to the fact that WCL had apparently incurred a liability to pay substantial sums by way of legal fees in defending the present action. I noted that I had been asked to leave that point open until I received further submissions on it, following judgment. I also referred to the fact that there were loose ends as a result of certain written submissions made following the trial. I eventually came to the conclusion that I was constrained to leave undecided, at that stage, the question of any liability on Mr Barnett’s part for alleged breach of fiduciary duty.
10.	Following my earlier judgment of 15th January 2012, I gave directions for a further hearing of the two matters with which I am now dealing. On the day when that further hearing was due to take place, Mr Barnett applied for the matter to be adjourned. I concluded that I ought to adjourn the hearing on terms that Mr Barnett would make an interim payment on account of his possible liability for the alleged breach of fiduciary duty. On 17th February 2012, I ordered Mr Barnett to make an interim payment of £450,000 to Ross River. I understand that he did not in the event pay any part of that sum. Also on 17th February 2012, I permitted Mr Barnett to serve Points of Defence addressing the extent of his alleged liability to Ross River. 
11.	In a judgment which I gave on 17th February 2012, I discussed the nature of the intended further hearing as to Mr Barnett’s alleged liability to Ross River. Ross River’s position was that it did not wish to serve any further evidence and would rely on the evidence adduced at the trial. Counsel for Mr Barnett did not press an earlier suggestion that Mr Barnett should be allowed to adduce further evidence. I took the view that the parties should not be permitted to call further evidence. The original trial was not a split trial; it was intended to be a trial of both liability and quantum. At that trial, Ross River had alleged that Mr Barnett owed fiduciary duties, that he had broken those duties and that Ross River had suffered loss as a result. Mr Barnett ought to have been well aware of the case which he had to meet in those respects. I considered that he had had a full opportunity to put his side of the case. He had been involved in the detail of the joint venture and he was in a position to put his side of the story. Although Ross River had put the case against him higher than I held in my judgment was justified, nonetheless since Ross River is confining itself to factual matters which were the subject of the evidence at the trial, Mr Barnett ought to have been able to put his factual case in response. As it happened, he gave evidence which I considered to be inconsistent and not impressive in a number of respects. Further, I concluded that I had to treat all of his evidence with caution. Although Mr Barnett has complained on a number of occasions that certain evidence was tendered by Ross River’s expert at a late stage in the trial, I did not consider that this complaint was justified. The evidence in question was given when the expert was called to give his evidence and following that evidence there was an adjournment over the long vacation in 2011 and the trial resumed and ran for a further 6 days in October 2011. When, in my earlier judgment, I stopped short of coming to a final conclusion on this question, I did so for specific reasons which I intended would be dealt with by hearing further submissions from the parties but not so as to necessitate the re-opening of the trial.
12.	On 4th May 2012, Mr Barnett applied for a stay of the action and an adjournment of the intended hearing as to Mr Barnett’s alleged liability for breach of fiduciary duty. By that date, he had served an Appellant’s Notice in relation to my earlier judgment of 25th January 2012. This application was a reversal of Mr Barnett’s earlier position which involved my determining the outstanding matters, whereupon he could appeal if he so wished and if permission to appeal were granted. I declined to stay the action. My principal reason was that I considered it to be more appropriate to deal with the outstanding issues at first instance before the matter would be taken further by way of the intended appeal.
13.	The matters dealt with in this judgment were the subject of an oral hearing on 19th and 20th June 2012. Mr Caplan appeared on behalf of Ross River and Mr Hill appeared on behalf of Mr Barnett.
The rival submissions
14.	The submissions which were made at the hearing as to Mr Barnett’s potential liability were complex and, particularly as regards the submissions on behalf of Mr Barnett, went much further than the submissions which had been made on earlier occasions, for example, when I was persuaded to make an order that Mr Barnett should make an interim payment to Ross River.
15.	In my view, it will help to explain my ultimate conclusion on this case if I refer to the rival submissions in a little detail.
The submissions for Ross River
16.	Ross River asks the court to order Mr Barnett to pay equitable compensation for the alleged breaches of fiduciary duty. Ross River does not ask the court to order Mr Barnett to pay to WCL the sums which, Ross River says, Mr Barnett caused or allowed WCL to pay away to connected persons. I will comment on the potential significance of this later in this judgment. 
17.	Mr Caplan, on behalf of Ross River, accepted that Ross River had to show that any breach of duty which I found established had caused loss to Ross River. He referred me to Swindle v Harrison [1997] 4 All ER 705 as an authority which shows that a claimant seeking equitable compensation for breach of a fiduciary duty has to prove that the relevant breach caused him loss. 
18.	Mr Caplan started his submission on the facts with the proposition that Mr Barnett was liable to make up the shortfall between the sum payable by WCL to Ross River and the sum which in due course WCL would pay to Ross River. He submitted that if WCL had not paid joint venture revenues to connected persons, then it would have been able to pay to Ross River the full amount due to Ross River. After all, WCL only ever had one project – the joint venture. If it had retained the joint venture revenues, then it would have been in funds to pay to Ross River its full share of those funds.
19.	Mr Caplan then addressed the figures which I had identified in paragraph 270 of my earlier judgment, on the basis that WCL might have been able to assume that the Net Profits would have been £1,500,000 and that WCL could retain £340,000 of that figure. If one further assumed that WCL and Mr Barnett were not acting in breach of fiduciary duty by paying up to £340,000 to connected persons, then instead of having retained the joint venture revenues, equal to the ultimate Net Profits figure of £1,209,815, they would have retained £869,815 and could have paid that sum to Ross River in relation to its entitlement of £1,043,926. Therefore, he submitted, the damage to Ross River was £869,815, less any sum actually recovered from WCL. If, for the sake of argument, Ross River received a dividend of £100,000 from the liquidator, then the damage would be about £769,815. Mr Caplan stressed that this calculation was too favourable to Mr Barnett because Mr Barnett as a fiduciary should not have exposed Ross River to the risk of non-payment by reason of the Net Profits figure turning out to be less than £1,500,000, as indeed was now the case. It should also be borne in mind that even taking the side agreement alone, Ross River was entitled to £325,000 plus the grossed up amount in relation to £235,000 (namely £391,667) producing a total debt of £716,667. It was submitted that Ross River was entitled to that figure whatever the Net Profits turned out to be and Mr Barnett should not have caused or allowed WCL to pay monies to connected persons so as to prevent it being in a position to pay that sum to Ross River in any event.
20.	Mr Caplan submitted that it was not in fact necessary to take into account the figures as shown in the cash statement but if it were material to do so, they showed a deficit in favour of connected persons and adverse to WCL of substantial sums both when the litigation commenced in February 2009 and at the date of the trial in July 2011.
21.	Mr Caplan then made a series of submissions in relation to the legal fees payable by WCL and Mr Barnett. He first submitted that it could not be right for WCL to use joint venture revenues to defend this litigation. Using joint venture revenues in that way would put Ross River in an impossible position. Ross River would have to give up its proper claims or assert those claims knowing that WCL would spend the joint venture revenues fighting the litigation until the time came when the joint venture revenues were consumed and there would be nothing left from which WCL could pay its debt to Ross River. It was submitted that WCL and Mr Barnett were acting in breach of their fiduciary duties to Ross River in spending joint venture revenues on legal fees in defending the litigation.
22.	In the alternative to the last submission, Mr Caplan said that I should take into account the particular way in which WCL and Mr Barnett sought to defend this litigation. It was said that the defence was a dishonest one; documents had been fabricated and lies had been told.
23.	Yet further, Mr Caplan submitted that WCL had no real or legitimate interest in defending this litigation. When this litigation began it was insolvent. If one considered its liability under the Side Agreement alone (£716,667) and the fact that its assets then were about £9,000 in the bank and the value of the unsold part of the development (later sold for the net figure of about £350,000), it should not have defended the claim at all. Indeed, it should have gone into liquidation. If it had done so, it would not have incurred any legal costs. In truth, the only real defendant (leaving aside Mr Harney who did not cause WCL to spend joint venture revenues on legal fees) was Mr Barnett himself. Mr Barnett alone should have been responsible for the legal fees. Indeed, in substance Mr Barnett did raise the monies to pay the solicitors formerly retained by WCL and Mr Barnett. But he arranged the payment of the fees by paying sums to WCL who would then immediately pay them out to the solicitors. Mr Barnett was now saying that he did not commit a breach of fiduciary duty by causing the company to pay fees to the solicitors and he was claiming that the monies which he paid into WCL were monies paid by him which reduced the deficit.
24.	In support of his submission that the court should take a realistic view that the defence of the litigation was really for the benefit of Mr Barnett and not for the benefit of WCL, Mr Caplan cited Re Bathampton Properties Ltd [1976] 1 WLR 168 as an illustration of a court, when deciding an issue as to the costs of the opposition to a winding up petition, holding that the petition had been opposed for the benefit of a director and shareholder and not in the company’s own interests. That assessment of the situation then affected the order for costs made by the court.
25.	Mr Caplan further submitted that if I were to hold that WCL was entitled to pay some legal fees and that Mr Barnett was not in breach of fiduciary duty to that extent, then I should not apportion the legal fees at 80% to WCL and 20% to Mr Barnett (as had been suggested by their former solicitors) and a fairer split would be the exact opposite (i.e. with 20% only being properly attributable to WCL). Further, I should disallow in their entirety costs incurred by WCL on issues which were advanced dishonestly or in bad faith.
The submissions for Mr Barnett
26.	Mr Hill on behalf of Mr Barnett referred to the fiduciary duties owed by Mr Barnett as set out in my earlier judgment. He submitted that in order to determine whether Mr Barnett was in breach of his fiduciary duties, it was necessary to look at each of the 215 transactions which were identified by Mr Davidson for Ross River and to ask, at the time that each transaction took place, whether Mr Barnett had acted in bad faith or had known and intended that Ross River would be disadvantaged by the transaction. It was not sufficient to look crudely at the overall cash position of WCL and to hold that just because WCL was now unable to pay its creditors that Mr Barnett must have broken his fiduciary duties to Ross River.
27.	Mr Hill sub-divided the 215 transactions into 3 broad categories: inter-company or connected party loans, payments pursuant to the side agreement and other payments not connected to the joint venture.
28.	As to the inter-company or connected party loans, I was referred to the detailed statements in relation to these loans which were set out in the report of Mr Tuffin, the expert retained by WCL and Mr Barnett, who had given evidence at the trial. It was submitted that a detailed analysis of all of these loans showed that the loans were mostly, if not entirely, repaid. In the case of Mr Barnett himself, the position as shown in the evidence at the trial was that WCL owed substantial sums to Mr Barnett and not the other way around. There was no breach of duty by Mr Barnett in WCL making loans to connected persons. WCL and the persons to whom WCL lent money, notably WDL, were engaged in projects where it was entirely proper for one entity to assist another entity with loans to ease cash flow difficulties. There could only be a breach of fiduciary duty if it were shown that Mr Barnett knew, or ought to have known, when the loan was made that there was no realistic prospect of the loan being repaid. Ross River could not prove what it had to prove in this respect; it did not call any evidence to that effect and, indeed, most of the money which had been loaned had now been repaid.
29.	As to the loans made under the side agreement, Mr Hill submitted that the substance of the matter was that the loans were really being made by Ross River to WDL and to Mr Harney, in return for high levels of interest. It was Ross River who insisted that the loans went through WCL. Accordingly, Ross River could not say that Mr Barnett was acting in breach of duty to Ross River by agreeing to its proposal. Further, WCL did not owe a duty to Ross River to “ring fence” part of the joint venture revenues to enable it to repay the sums due. WCL was entitled to take the view that the source of repayment of these loans ought to be the borrowers, WDL and Mr Harney. Thus, before the side agreement, WCL was entitled to retain 2/3 of expected Net Profits of £1,500,000. Thus, it could spend £1,000,000 before it was spending monies due to Ross River. That remained the position after the side agreement. WCL and Mr Barnett were entitled to take the view that the source of the monies to be paid to Ross River under the side agreement should be WDL and Mr Harney. At the lowest, Mr Barnett was not in breach of duty to Ross River by taking that view. After the third supplemental agreement, WCL was entitled to retain 60% of Net Profits rather than 2/3, but the point was otherwise valid. WCL had not paid away to connected parties sums which exceeded the sum it was entitled to retain on the basis described above.
30.	Mr Hill then dealt with the category of payments which were said not to be joint venture expenditure. He identified a number of recurring items said to be for management fees and office and administration costs. Although he accepted that I had decided, based on the evidence at the trial, that WCL was not entitled to claim these costs as joint venture expenditure, he submitted that they had actually been paid by WCL. It was entitled to pay for its offices and for administration. It needed to be managed and was entitled to pay its directors for their management. Furthermore, even if he was bound to accept that these items were not joint venture expenditure, nonetheless it could not be said that Mr Barnett was acting in breach of fiduciary duty unless it could be shown that he knew, or ought to have known, that WCL should not have made those payments. Mr Hill also identified a number of cases where he submitted the items were, after all, proper joint venture expenditure but where no submission to that effect had been made at the trial. In such a case, it could not be shown that Mr Barnett was acting in bad faith when he made the payment.
31.	Mr Hill then dealt with the question of the legal costs incurred by WCL. He submitted that the burden of legal costs was the most significant factor in diminishing the funds of WCL and destroying its ability to pay Ross River. Mr Hill analysed Ross River’s pleadings starting with the original Particulars of Claim and then identifying the changes made to that pleading when new allegations were made and other allegations fell away. He submitted that a defendant was entitled to defend itself in legal proceedings. In this case, Ross River had not pleaded that there was a breach of fiduciary duty as a result of WCL defending itself. Ross River had not called any evidence to support that allegation and had not cross-examined Mr Barnett in relation to it, apart from one passing reference identified by Mr Caplan. It was submitted that if Ross River had any basis for saying that WCL should limit the amount it ought to be allowed to spend by way of legal fees, it ought to have applied to the court for an order to that effect. If it were really right that the real defendant was Mr Barnett alone, why did Ross River continue to have WCL as a defendant? If it were said by Ross River that it needed WCL as a defendant in order to determine the amount of the Net Profits, the answer to that was that the contract provided for that question to be determined by an independent expert and not by the court. That course would have been cheaper for everyone.
32.	Mr Hill referred to the figures for costs which had been identified in the allocation questionnaires for both sides in August 2009. He also submitted that WCL had succeeded in relation to several of the issues as to the amount of the Net Profits.
33.	Mr Hill also referred me to the Points of Defence which had been settled by Mr Barnett in preparation for the hearing as to his liability to Ross River. I ought to record at this point the approach I will adopt in relation to this pleading. In the Points of Defence, Mr Barnett deals with an allegation, which had not been pleaded before the trial, but which had been raised by Ross River at a hearing, following my earlier judgment, when I was asked to order an interim payment against Mr Barnett. The allegation was that Mr Barnett had a duty to wind up WCL in early 2009 rather than defend this litigation. In his pleading Mr Barnett refers to matters which were not in evidence at the trial but, of course, the relevant allegation had not been pleaded and he had not been cross-examined in relation to the point. Further, some parts at least of what he says are borne out by the emails which he sent to his accountant in March 2009. I refer to the fact that Mr Barnett appeared genuinely to believe that WCL was not liable under the side agreement and, further, that Mr Barnett appears to have thought that the development would not result in any significant profit. Although I am not prepared to receive new evidence from either Ross River or Mr Barnett, I will consider the Points of Defence as effectively submissions made by Mr Barnett rather than as admissible evidence. In any case, in other respects, much of the Points of Defence consists of submissions by Mr Barnett and I am able to take account of those matters in so far as they amount to submissions. 
Ross River’s submissions in reply
34.	Mr Caplan made detailed submissions in reply to Mr Hill. In the course of those submissions, I asked Mr Caplan if the logic of his position in relation to the legal fees incurred by WCL was that WCL should have gone into liquidation in early 2009, rather than in 2012, with the result that one ought to compare the situation which Ross River would have been in if WCL had gone into insolvent liquidation in early 2009, with the situation which Ross River was now in following WCL’s liquidation in 2012. Mr Caplan submitted to me that a comparison between the different outcomes of two different liquidations at two different dates was “simply not possible”. 
35.	In order to address the submissions made to me, it will be helpful to discuss separately the question of the deficit in the account as between WCL and connected persons, the issues as to WCL’s defence of these proceedings and its liability to pay legal fees as a result and the implications of the liquidation of WCL. I will then discuss the various issues which I consider need to be resolved for the purpose of deciding on Mr Barnett’s liability for alleged breaches of his fiduciary duties to Ross River.
The deficit
36.	In my earlier judgment, in particular between paragraphs 272 and 279, I addressed the evidence which was before me at and after the trial which related to Ross River’s case that Mr Barnett had caused or allowed WCL to make payments to connected parties other than for joint venture purposes. That evidence included evidence given by Mr Davidson in his report and a revised statement running to 24 pages showing the cash position of WCL from February 2005 to July 2011 and showing what was said to be the deficit on non-joint venture matters, adverse to WCL. Following the trial, WCL submitted a detailed written response raising a large number of points which I discussed at paragraph 276 of my earlier judgment. I then mentioned but did not decide the point as to WCL’s entitlement to use its assets to pay legal fees in connection with its defence of the present litigation. I concluded at paragraph 279 of my earlier judgment that the question of whether Mr Barnett had broken his fiduciary duties still depended upon the calculation of further figures in accordance with the findings on other issues in that judgment. I recorded that my expectation was that those calculations would reveal that WCL and Mr Barnett had used the revenues of the joint venture in a way which jeopardised Ross River’s right to payment under the JVA and the Side Agreement.
37.	Following my earlier judgment, Mr Davidson on behalf of Ross River produced a revised version of the earlier cash statement. Mr Barnett has responded to that revised statement. These statements have been presented to show Ross River’s case that WCL paid monies to others, in particular to connected persons, which were not for joint venture purposes. The statements show that WCL allowed its funds to be used to benefit WDL. WDL was carrying out a development elsewhere during the period covered by these statements and the statements show monies going out to, and coming back in from, WDL. WCL borrowed money from the bank not for its own purposes but to allow the money to be used by WDL for its own development. However, just as the statements show monies leaving WCL in the direction of connected persons, they also show monies being repaid to WCL by the connected persons. Of course, even if a connected person paid back the amount of the monies advanced by WCL, WCL might remain worse off as a result of bank charges and interest in respect of the monies borrowed by WCL from its bank.
38.	It might be said that what ultimately matters is the final state of the account and whether that final position has prejudiced Ross River as to its ability to be paid the monies due to it from WCL. The cash statements show that the deficit adverse to WCL and favourable to connected persons as at the date of the trial in July 2011 was £775,868.50. However, there are three pairs of entries dealing with payments of legal fees which need to be considered. What happened was that in the period covered by the cash statements, up to July 2011, Mr Barnett made payments to WCL of £50,000, £50,000 and £200,000 respectively. Those monies were paid in by Mr Barnett so that they could be immediately paid out to the solicitors then acting for WCL and Mr Barnett. The sums paid out were £48,000, £85,000 and £200,000 respectively. These payments out attracted modest charges of £23 a time. WCL was able to pay out the particular sum of £85,000 because, around that time, it received a VAT repayment. The way these payments are treated in Ross River’s cash statement is to show the three payments out as payments to connected persons and thereby increasing the deficit. The payments in by Mr Barnett are treated as payments in by connected persons and thereby reducing the deficit. The rationale for this approach is said to be that when WCL paid the solicitors, it was making a payment which was not for WCL’s benefit but was for the benefit of Mr Barnett and was therefore a payment to a connected person. If, on the other hand, the payments to the solicitors were treated as being for WCL’s benefit and not payments to connected persons, then the deficit at the end of July 2011 would not be £775,868.50 but would instead be £442,799.50.
39.	The cash statements were up to date as at July 2011. I have not been given a cash statement which shows the position when WCL went into liquidation. However, I was told that since July 2011, WCL has received further sums from Mr Barnett and it has paid further sums to the former solicitors. Based on the figures provided in the former solicitors’s letter of 24th January 2012, WCL has paid them the total sum of £596,346.82. Ignoring the fees of £23 each time, as referred to above, the cash statements show that the former solicitors had up to July 2011 received £333,000. Therefore, WCL must have paid a further £263,346.82 to the solicitors since July 2011.
40.	I was also told that Mr Barnett has continued to pay sums to WCL to enable it to pay the former solicitors. It is difficult to see how WCL could have paid further sums to the former solicitors without such funding. Of course, if Ross River is right that payments by WCL to the former solicitors are payments to connected persons and not for the benefit of WCL then none of this will matter. It seems likely, on that basis, that the deficit when WCL went into liquidation would have been much the same as it was  as at July 2011. However, if Ross River were wrong about the treatment of the payment of legal fees by WCL then matters probably have changed since July 2011. If the further payments of £263,346.82 are not to be included so as to increase the deficit and the payments by Mr Barnett since July 2011 are used to reduce the deficit then the deficit when WCL went into liquidation would be reduced to £179,452.68.
WCL’s position in relation to the legal fees
41.	I will now deal with two matters which are connected and which assumed great importance in the course of the rival submissions. The first concerns the suggestion made by Ross River that, for commercial reasons, WCL should never have defended these proceedings but should instead have gone into liquidation at around the time that the proceedings were commenced. The second concerns the level of the legal costs which have been incurred by each side.
42.	Ross River issued its claim form in these proceedings on 27th February 2009. The original Particulars of Claim were dated 6th April 2009. In my earlier judgment, I commented on the many amendments which were subsequently made to Ross River’s pleadings. The focus of Ross River’s claims varied considerably over the life of this litigation. Claims which were originally made dropped away and extensive new claims were added. 
43.	Ross River contends that for commercial reasons WCL should not, from the outset, have defended this claim. I therefore ought to begin by examining the original claim pleaded by Ross River. Ross River pleaded that it had made a number of offers to buy the residential part of the development from WCL. Ross River then pleaded the contracts made between WCL and Westbury. It was pleaded that WCL and Mr Barnett and Mr Harney owed fiduciary duties to Ross River. It was then alleged that WCL, Mr Barnett and Mr Harney were in breach of the express and implied terms of the JVA. It was also alleged that the same three Defendants were in breach of their fiduciary duties to Ross River in various respects. Finally, it was alleged that all the Defendants (including Westbury) were liable for conspiring to injure Ross River. More particularly, as regards the claim against WCL, Ross River alleged that WCL had mishandled the joint venture development in a number of ways, had failed to provide information to Ross River, had acted wrongly in contracting to sell parts of the development to Westbury and had failed to account to Ross River. Ross River claimed from WCL the sum of £795,000, alternatively, £716,666 under the side agreement. 
44.	Ross River later amended its Particulars of Claim to contend that WCL and Mr Barnett and Mr Harney were liable to Ross River in the tort of deceit. In particular, it was alleged that those Defendants had knowingly made false representations designed to induce Ross River to elect to receive the Development Profit under the JVA and to forego the Basic Profit. Although Ross River claimed an account from Ross River in the original Particulars of Claim, it did not in the original pleading ask the court to determine the many issues as to the amount of Net Profits under the JVA. However, the Particulars of Claim were subsequently amended to include a large number of detailed points as to the amount of Net Profits, asking the court to determine those issues.
45.	In March and April 2009, Mr Barnett sought advice from an accountant at the firm of Harris Lipman as to WCL’s response to the difficulties WCL and Mr Barnett had with Ross River. Mr Barnett also appears to have kept Mr Barton of Williams & Co informed of the fact that he was taking advice from the accountant. The full facts in relation to this topic were not explored at the trial. However, the trial bundle included a number of documents which showed the advice which WCL and Mr Barnett sought from the accountants and the reasons why they sought it. Those documents are also potentially revealing because they were not documents which were passing between the parties, where one party or the other was taking up a position in the litigation. These documents were written at a time when WCL and Mr Barnett appeared to be genuinely seeking advice as to what to do and the documents appear to be reliable as to some of their thinking at any rate. 
46.	In his email of 16th March 2009 to the accountants, Mr Barnett wrote:
“It’s rather a messy situation as you will see from the following summary and I’m wondering if the liquidation process is a suitable route to take, if so I will need to move quickly. The objective is not only to bring the contention to an end swiftly and avoid the potential legal costs, but also to extract the property into my new clean company (at full current market value).”
47.	The same email of 16th March 2009 referred to Ross River’s claim to monies due under the side agreement; it seems clear that Mr Barnett thought that WCL was not liable to pay the same. Mr Barnett also commented that his expectation that the profits from the joint venture development would be “negligible to break even”. Mr Barnett then asked a number of detailed questions as what might transpire if WCL were to be placed in liquidation. 
48.	On 27th March 2009, Mr Barnett sent a further email to the accountant. In this email, Mr Barnett gave the accountant further information, as Mr Barnett saw it, about the side agreement and he asked a number of questions as to WCL’s position under the side agreement. Mr Barnett’s position was that the side agreement should be set aside as it did not represent the real agreement which had been made. A meeting was arranged between Mr Barnett and the accountant on 8th April 2009. There was no evidence as to what transpired at that meeting.
49.	At the trial, Ross River’s counsel did not investigate with Mr Barnett the statements he had made in the two emails, to which I have referred, nor did he explore the advice which the accountant had given. There was some limited cross-examination only by reference to these documents. When Ross River’s counsel cross-examined Mr Barnett, he referred to a question raised in the emails as to whether the directors of WCL had committed a breach of the JVA or committed any criminal offence. It was suggested to Mr Barnett that the fact that this question was asked showed that Mr Barnett knew that he had done something unlawful. Apart from this question, it was not suggested to Mr Barnett that WCL should have gone into liquidation at around the time the litigation began. Yet, the submissions made to me at the further hearing as to Mr Barnett’s liability relied heavily on the contention that WCL should have gone into insolvent liquidation at that point.
50.	I now turn to the topic of the costs which each side has incurred in these proceedings. The predicted level of costs was the subject of allocation questionnaires served by the parties in August 2009. In Ross River’s questionnaire, it stated that its costs up to that point were £105,000 and it estimated its overall costs to be £250,000. In WCL’s questionnaire, its comparable figures were £50,000 and £175,000.
51.	Following my earlier judgment of 25th January 2012, I have been provided with further information as to the level of the legal costs incurred by both sides. Ross River has not given any real detail of the level of its costs but WCL and Mr Barnett have said that their understanding is that Ross River’s solicitor and client costs are of the order of £2,000,000, or more, and that statement has not been contradicted by Ross River. The solicitors formerly acting for WCL and Mr Barnett set out the position as to those parties’ legal costs in a letter dated 24th January 2012. The solicitors stated that their fees, inclusive of VAT, were £1,150,000. They said that WCL and Mr Barnett were jointly and severally liable for these fees. The letter stated that WCL had paid £596,346.82 on account of fees and Mr Barnett had paid £40,696 and had given security for further fees where the value of the security was £300,000. The solicitors stated that the total fees would in due course have to be apportioned between WCL and Mr Barnett and the solicitors suggested that the right apportionment would be 80% to WCL and 20% to Mr Barnett.
52.	In the Points of Defence served by Mr Barnett in advance of the hearing as to his liability, he has suggested that some of the figures put forward in the  solicitors’ letter of 24th January 2012 were incorrect because they left out of account fees paid by WCL to other solicitors who had been instructed earlier and also left out of account a payment made directly to the expert witness retained by WCL and Mr Barnett. He now suggests that the right figures are that WCL and Mr Barnett have incurred a liability for fees totalling £1,163,540.99 and that WCL has paid a total of £556,376.68. He also suggests that the sums paid by him or on his behalf come to £120,846.
53.	I was shown correspondence from May 2011 in which the solicitors for the parties referred to the question whether WCL could properly use its assets to pay fees to the solicitors retained by WCL and Mr Barnett in this litigation. This correspondence was not long before the trial which began on 13th July 2011. This topic came up in May 2011 because the solicitors for WCL and Mr Barnett sought further security from Ross River for their costs. The solicitors then identified that their costs were expected to be of the order of £817,000, excluding VAT. The question of security for costs was resolved by agreement. The solicitors for Ross River stated in the correspondence at that time that WCL’s legal fees for defending the litigation were not joint venture expenditure. They suggested (in a letter of 17th May 2011) that WCL would be “misapplying” its funds by paying legal fees. The point was made more clearly in Ross River’s solicitors letter of 26th May 2011 where it was contended that WCL was not entitled to use its assets to pay the legal fees. It was further contended that WCL was using its assets in this way for the personal benefit of Mr Barnett. These contentions were rejected by the solicitors for WCL and Mr Barnett.
54.	During Mr Barnett’s cross-examination, it was put to him that WCL should not be using its assets to pay the legal fees. Mr Barnett replied that the case was brought against WCL as well as against him.
The liquidation of WCL
55.	Following the hearing on 19th and 20th June 2012, the solicitors for Ross River provided me with an undated letter from the liquidator of WCL. The letter appears to have been written in late July 2012 and it was provided to me on 26th July 2012. The solicitors provided me with that letter in order to make a specific point about evidence which Mr Barnett had earlier given about the state of indebtedness as between WCL and WDL. Mr Barnett replied to Ross River’s solicitors’ comments in an email to the court sent on 30th July 2012. Mr Barnett did not object to the court receiving the information contained in the liquidator’s undated letter. 
56.	The liquidator’s letter is fairly short but it does provide some information as to WCL’s financial position. The liquidator refers to assets of £469,997.75. That figure includes, apparently at its full nominal value, a debt owed to WCL of £121,456. The liquidator points out that £100,000 of this debt may not be owed by WDL, as WCL’s accounts would suggest, but by Mr Barnett. The identity of the debtor may be material. Mr Barnett has apparently stated that he will exercise a right of set off of monies which he says are due from WCL to him, so as to extinguish the debt of £100,000. 
57.	The liquidator appears to give two figures for the sums owed by WCL to its creditors. The lower figure is £2,794,691. There is no break down of this figure. It is likely to include the sums due to Ross River under the JVA and the Side Agreement. It may also include sums due from WCL to its former solicitors who were instructed in this action and a further sum owed to the solicitors who were instructed by WCL to do work in connection with the joint venture. It may also include sums due to Mr Barnett and possibly even Mr Saunders. 
58.	Taking the liquidator’s figures for WCL’s assets and liabilities, the liquidator refers to a possible dividend for creditors of 16.87 in the £. However, there appears to be doubt about the debt owed to WCL which is referred to above. Further, the liquidator has not added into the calculation the fee payable to the Secretary of State, nor other fees and charges. Further, I have not yet been asked to determine who should pay the costs of this action. Ross River has indicated that it will seek an order for costs against WCL. Without prejudging that matter, if WCL were to be ordered to pay Ross River’s costs of the action or any substantial part of them, and those costs were not paid by anyone else (such as Mr Barnett), that would change the dividend position further. The change could be significant as I was told that Ross River has spent some £2,000,000, or more, on this litigation.
59.	It is obviously impossible to form any reliable view as to the precise figure which will in due course be paid by the liquidator of WCL to Ross River in relation to WCL’s liability to pay £1,043,926. However, on the information at present available, it seems that Ross River is unlikely to receive more than a very modest percentage of this sum. Taking a dividend of 10p in the £, for the sake of illustration only, such a dividend would leave a shortfall in payment to Ross River of £939,533.
Discussion
60.	In my earlier judgment, I determined that Mr Barnett owed fiduciary duties to Ross River which were a duty of good faith and a duty not to do anything in relation to the handling of the joint venture revenues which favoured himself to the disadvantage of Ross River. I explained that a reference to “favouring himself” included a case where the party favoured by him was a company controlled by him or in which he had a substantial interest. I also explained that his fiduciary duties extended not only to protect Ross River’s rights to payment under the original JVA but also to payment of the sums due to Ross River under the Side Agreement.
61.	I now have to consider whether Ross River has established that Mr Barnett broke one or both of those duties and, if so, what adverse consequences were caused to Ross River as a result.
62.	Mr Caplan’s basic submission on the facts was that: (1) WCL only ever had one project, the joint venture; (2) WCL should have retained all of the revenues of the joint venture until Ross River was paid its share of Net Profits; (3) if WCL had retained all of the joint venture revenues, it would have been able to pay Ross River in full; (4) WCL is now in insolvent liquidation and Ross River will receive very little, if anything, from WCL; (5) WCL and, now more importantly Mr Barnett, should not have allowed this to happen; (6) WCL and Mr Barnett must have been in breach of fiduciary duty in allowing this state of affairs to come about; (7) the loss suffered by Ross River is exactly equal to the sums not paid to it by WCL.
63.	Ross River’s basic submission ignores a number of material matters. In many ways it is a repetition of a submission which I did not accept in my earlier judgment. I then held that not every payment made by WCL to a third party necessarily amounted to a breach of fiduciary duty. There could be circumstances in which WCL could pay third parties out of joint venture revenues, otherwise than by way of joint venture expenditure, without there being a breach of fiduciary duty. 
64.	More importantly, in view of the facts as they have now emerged as to the legal costs of this litigation, the basic submission ignores the fact that WCL has paid out a sum approaching £600,000 in legal costs incurred in defending this litigation. As WCL was only entitled to retain £165,889 out of the Net Profits of £1,209,815, the burden of legal fees alone on WCL would have produced the result that WCL would have been insolvent and liable to be wound up. The result will be worse for WCL if it is ordered to pay Ross River’s costs of the litigation and those costs are not met by someone else (such as, possibly, Mr Barnett). I have been told that when I have given this present judgment, Ross River will then apply for an order that WCL should pay its costs. Conversely, WCL’s financial position would be improved to some extent if I made an order for its costs to be paid by Ross River, but that will be resisted by Ross River. I do not intend to pre-judge the question as to which party should pay costs. I can only realistically approach the matter for the purposes of this present judgment on the basis of the costs actually incurred by WCL, unless I accept one or other of the arguments put forward by Ross River for saying that WCL did not in fact incur those costs or that it should not have done so. 
65.	The issues arising as to the legal costs incurred by WCL became a most important consideration for both sides in their submissions as to Mr Barnett’s liability. In the course of the submissions, Ross River put its case in various ways. It was said that WCL had no business defending this litigation. It was said that WCL ought to have gone into insolvent liquidation in early 2009 and incurred no costs. Even if it did not go into insolvent liquidation at that point, it should still not have incurred costs or possibly only incurred nominal costs. It was also said that, in truth, WCL had not paid any costs. The person who paid the costs was Mr Barnett. He paid the former solicitors by passing the money he provided through WCL’s bank account but that should not deflect the court from finding that it was after all Mr Barnett who was paying the solicitors for representing him. In support of all these submissions, it was said that Mr Barnett was the only relevant defendant. Ross River was never likely to recover any substantial sum from WCL and it had to sue Mr Barnett personally. Mr Barnett appreciated that so that in substance this was a claim by Ross River against Mr Barnett personally.
66.	At the trial, Ross River did not really advance the case that WCL and Mr Barnett were in breach of fiduciary duty by reason of WCL defending these proceedings, and incurring legal costs in the course of doing so, nor was it said that there was a breach of fiduciary duty by reason of the fact that WCL had not gone into liquidation in early 2009. Having re-read the pleadings, I do not consider that Ross River made any specific allegation of breach of fiduciary duty in these respects. There was a passing reference, in the cross-examination of Mr Barnett, to the fact that WCL was apparently using its assets to pay its legal costs. Nonetheless, I will consider what might be said on the question as to whether WCL or Mr Barnett were in breach of fiduciary duty in these respects as a consideration of that question will assist me when I consider how to analyse the position as between WCL and Mr Barnett in relation to the monies paid by Mr Barnett to WCL and then used to pay the former solicitors.
67.	I consider that WCL was a necessary and a real defendant to the claims brought by Ross River. Much of the relief claimed by Ross River was relief in relation to WCL. The determination of the Net Profits was a claim which could only be brought against WCL. WCL was the only defendant contractually bound to pay to Ross River its share of Net Profits. The same comment applies to the issues as to the side agreement and the identity of the person liable under the side agreement to pay Ross River. On the face of it, WCL was entitled to defend itself and to use its own assets to do so, even though the use of those assets might produce the result that it used up all of its available funds and ended up being unable to pay any sum found to be due to Ross River. 
68.	At the trial, the only point made by Ross River as to why WCL should not be entitled to use its own assets to pay its legal costs was to invoke the suggested analogy of a dispute between shareholders where the company was not a relevant party and neither shareholder should be allowed to use the company’s assets to fund the litigation. I did not find that analogy applicable to the claims which Ross River had made against WCL. Nor do I find of any particular assistance the way in which the court reacted to the facts in Re Bathampton. For present purposes, that case is only a reminder that a court will be prepared to come to a conclusion that litigation is being brought or defended in form in the name of a company but in substance otherwise than in the company’s best interests and to serve the collateral interests of those who are still able to control the company. The decision reached on the facts in that case is no real guide to the decision which I should reach on the facts in the present case.
69.	In my judgment, both WCL and Mr Barnett were real and substantial defendants. Both were entitled to defend the claims brought against them without there being a breach of fiduciary duty owed to Ross River. The fiduciary duties which, in my earlier judgment, I found to exist do not go so far as to restrict either WCL or Mr Barnett from putting forward their chosen stance in litigation brought by Ross River against them. It would be a very onerous fiduciary duty which prevented a party to adversarial litigation from defending itself. Mr Caplan says that even if that assessment of the situation might be right in general terms, it is not right here in view of the nature of the defences which were run, the evidence given by Mr Barnett and my assessment of that evidence and his overall reliability. I have carefully considered that submission. I have concluded that it would not be right to hold that either WCL or Mr Barnett were in breach of the fiduciary duties which I found they owed to Ross River by reason of the nature of the defences which were put forward.
70.	Mr Caplan submitted that it simply cannot be right that WCL should be allowed to use its assets, which were in effect the joint venture revenues, to defend the claim made by Ross River. WCL’s conduct placed Ross River in an impossible position. If WCL had been able to pay its debts to Ross River when the litigation began, then the case would be one where WCL had used its assets to pay for its legal costs and thereby produced the result that it became unable to pay anything significant to Ross River. I am not able to hold that WCL’s conduct in this respect placed either it or Mr Barnett in breach of their fiduciary duties to Ross River. Unfortunately, Ross River’s problem is not an unusual one. It is not uncommon for a potential claimant to have to consider whether a defendant is worth suing. Even if the potential defendant is worth suing at the outset, the potential defendant may use up much of, or even all of, its funds in defending the litigation so that it becomes worthless during, or by the end of, the litigation. Even where the court considers that a defendant is likely to attempt to dissipate its assets to make itself judgment proof, the court still allows such a defendant to use its assets to defend the litigation brought against it. 
71.	Although I have held that WCL and Mr Barnett owed fiduciary duties not to use joint venture revenues in a way which favoured themselves to the disadvantage of Ross River, when I defined that duty I had in mind the case which was run at the trial, namely, that WCL had made payments out of joint venture revenues which resulted in it being unable to pay Ross River. At that stage, the parties had not focussed on the question, which has attracted great significance at this later stage, of whether WCL could use its assets even if they were effectively joint venture revenues to defend this litigation. I am not prepared to hold that the fiduciary duties which existed in relation to WCL and Mr Barnett extended to preventing WCL using its assets to defend this litigation. 
72.	Further, when describing Mr Caplan’s submission, I referred to the hypothesis that WCL would have been able to pay its debts to Ross River when the litigation began. In fact at that stage, it was not so able. Further, it could be said that the monies used to pay the legal fees were not joint venture revenues. It could be said that those revenues had already been largely dissipated and the funding of the legal fees was not from joint venture revenues but was funding provided by Mr Barnett.
73.	Mr Caplan also submitted that if I held, as I do, that WCL was entitled to incur legal costs in the course of defending itself in this litigation, then the former solicitors’ charges need to be apportioned between WCL and Mr Barnett. It seems to be agreed that the costs should be apportioned. Each side contends for an 80/20 split but in diametrically opposed ways. I consider that the appropriate apportionment is not a straightforward matter. Something might turn on a detailed assessment of the work which was done, the issues to which it related and the extent to which those issues were of greater significance to one client or the other. In the absence of any real help of that kind, I do not consider that there is any reason to apportion the costs between WCL and Mr Barnett otherwise than 50/50.
74.	I also need to consider the contention, if this is how the matter is put, that it was a breach of fiduciary duty for WCL and Mr Barnett to omit to place WCL in liquidation in early 2009. Such an allegation has not been pleaded and it was not put to Mr Barnett when cross-examined. Mr Barnett did take advice on whether WCL should be wound up or, possibly, whether it was in Mr Barnett’s separate interests for WCL to be wound up. There is no evidence as to the advice which Mr Barnett received. In these circumstances, I consider that I ought not to decide that it was a breach by WCL or by Mr Barnett of a fiduciary duty owed to Ross River to omit to take steps to wind up WCL in early 2009.
75.	Having considered the submissions which were made as to WCL’s conduct in defending these proceedings, and incurring costs in the course of doing so and not taking steps to go into liquidation in early 2009, I will next consider the way to react to what is shown in the cash statements as to the payments made by Mr Barnett to WCL followed by payments made by WCL to the former solicitors. 
76.	I have held that WCL was entitled to defend this litigation. I have also held that Mr Barnett was not in breach of his fiduciary duties to Ross River in causing or allowing WCL to defend the litigation. The legal fees payable by WCL and Mr Barnett were either £1,150,000 or £1,163,540.99, depending on whether I take the solicitors’ figure or Mr Barnett’s figure. In practice, there is not much between them. I have also held that an equal apportionment of the legal fees between WCL and Mr Barnett is not inappropriate. That would produce a liability of WCL for legal fees of about £575,000. In fact, WCL has paid £596,346.82 or £556,376.68 depending on whose figures I accept. On this basis, the payment of legal fees at that level did not involve any substantial payment by WCL which was not for the benefit of WCL but was for the benefit of Mr Barnett or for the benefit of connected persons. Accordingly, the payment of legal fees at that level should not be held to be a breach by Mr Barnett of his fiduciary duties to Ross River. Yet, in a case where WCL only carried out one project and was only entitled to retain approximately £166,000 from that project, the burden of legal fees would have driven WCL into liquidation even if it had kept every penny of the joint venture revenues in a separate account which could be used only for joint venture expenditure and the payment of legal fees.  
77.	I have already explained that WCL and Mr Barnett made themselves jointly and severally liable to the solicitors for fees in the order of £1,150,000 and that WCL has discharged about one-half of those fees. In view of my earlier comments about an apportionment of costs as between WCL and Mr Barnett, the position appears to be that WCL has paid its contribution to its solicitors. It also appears that while Mr Barnett has made some payments to the solicitors and has given them security over other property, the solicitors have not been paid by Mr Barnett his 50% of the costs. Thus, Mr Barnett has caused WCL to pay its share before he has paid the full amount of his share. I do not consider that such conduct is a breach of the fiduciary duty which Mr Barnett owed to Ross River. 
78.	Another way of considering the matter is by reference to the possible figure for the deficit which I identified in paragraph 40 above, namely, £179,452.68. If WCL had been entitled to proceed on the basis that the Net Profits of the joint venture would be of the order of £1,500,000 and after the entry into the side agreement (in August 2005) and the third supplemental agreement (in May 2006), WCL would be entitled to retain £340,000 (see paragraph 270 of my earlier judgment), then paying monies to connected persons so as to produce a deficit of some £179,000 would not be paying monies which would jeopardise WCL’s ability to pay Ross River. This argument has some force although it means that WCL is taking the risk that the Net Profits might not be £1,500,000 and indeed it turned out that it was lower (at just over £1,200,000) and it can be said that WCL and Mr Barnett were not entitled to take a risk in this way which might prove adverse to Ross River.
79.	Having held that WCL and Mr Barnett were not in breach of fiduciary duty in using WCL’s assets to pay its legal fees, and in view of the resulting figure for the deficit of £179,452.68, I now have to consider whether Ross River has shown that Mr Barnett was in breach of his fiduciary duty to Ross River. When the litigation began, the deficit in relation to payments made to connected persons was just under £700,000. The deficit calculated as described above is obviously much lower than that figure. Ross River would have a much stronger case for breach of fiduciary duty if I were to consider the amount of the deficit when the litigation commenced. However, what matters now, certainly as regards any possible causation of loss, is the amount of the deficit when WCL went into liquidation.
80.	I have pointed out that if Mr Barnett was entitled to expect the Net Profits from the joint venture would be of the order of £1,500,000, then WCL would have had available to it some £340,000. There was no examination at the trial of what WCL and Mr Barnett were entitled to expect by way of Net Profits during the course of the development itself. There was general evidence to the effect that the state of the market was very different at different points during the relevant period. I have pointed out that in March 2009 when Mr Barnett instructed the accountants to advise him on the winding up of WCL, he told the accountants that the Net Profits would be nil or negligible. Ross River argues with some force that even if WCL and Mr Barnett could reasonably have predicted a Net Profits figure of £1,500,000 they should also, compatibly with their fiduciary duty, have appreciated that that figure was only a prediction and that the future was not predictable. In view of the fact that this topic was not examined at the trial, I am not able to make a finding that payments which exceeded, say, £X should have been appreciated by Mr Barnett as placing on Ross River an unacceptable risk of it not being paid in full. Further, many of the points made by the parties in the course of submissions, as recorded above, cannot be the subject of any reliable findings of fact in view of the way the matter was not explored at the trial.
81.	Mr Barnett may have been in breach of his fiduciary duty to Ross River at an earlier point in time when the deficit was much greater than it later became. However, Mr Barnett has taken steps which, correctly analysed, resulted in the deficit being a lower figure and, in particular, at a level where I am no longer able to hold that the existence of the deficit is attributable to a breach of fiduciary duty by Mr Barnett.
82.	My conclusion on the evidence at the trial is that Ross River has not shown that Mr Barnett was in breach of his fiduciary duty in relation to a deficit of £179,452.68.
83.	If I had held that some part of the deficit was attributable to a breach of fiduciary duty by Mr Barnett, then before considering whether such a breach had caused a loss to Ross River, I would have wished to consider the effect of an order requiring Mr Barnett to restore to WCL the amount of the sums which he had caused or allowed WCL to pay away in breach of duty. I referred to this point at paragraph 285 of my earlier judgment. It seems to me that where the alleged breach of duty involved WCL paying away sums to third parties, the most natural form of relief for a court of equity to grant would be to require the monies to be paid by the wrongdoer to WCL, to restore the position and to remedy the breach. Ross River did not ask me to make such an order. However, if the effect of such an order would have been to remedy the breach, then it would seem that when I consider the causation of any loss to Ross River I should compare its present situation with the situation it would have been in if the monies had not been paid away, which can be identified by considering the position it would have been in if the monies were ordered to be paid back.
84.	Accordingly, what would be the position of Ross River if I, for the sake of illustration, ordered Mr Barnett to pay £100,000 to WCL? WCL would still be insolvent. However, WCL would have an additional £100,000 to distribute between its creditors. That would increase the amount of the dividend to some extent. As explained earlier, it is impossible for me to identify any reliable figure for the amount of the dividend which will be paid in the present circumstances and it equally follows that it would be impossible for me to identify the increased amount of the dividend which would be paid if Mr Barnett paid £100,000 to WCL. One matter which might affect the amount of the dividend would be the order as to costs which I will be asked to make following this judgment. If I felt that the amount of the dividend would be 10%, then an order that Mr Barnett should pay £100,000 to WCL would increase Ross River’s recovery by £10,000. With so many imponderables as to the outcome of WCL’s insolvency, in my judgment, it is not possible to calculate damages to that degree of accuracy. Accordingly, if I had held that some part of the deficit of £179,452.68 was attributable to a breach of duty by Mr Barnett, I would have been very hesitant before feeling able to quantify any figure which could properly be awarded to Ross River by way of equitable compensation.
85.	I have carefully considered whether notwithstanding all of the uncertainties I should nonetheless do what a court is often obliged to do which is to “do the best it can” to arrive at a fair figure for compensation in respect of a legal wrong. I do not think that an approach of that kind would justify me in selecting a figure to be awarded as equitable compensation in this case. First, I have held that the state of the evidence at the trial, the failure to put matters in cross-examination, the very high sums which WCL has paid in defending itself in these proceedings and the fact that WCL’s expenditure has been funded by Mr Barnett have combined to produce the result that Ross River has not proved that any breach of fiduciary duty by Mr Barnett has caused any loss to Ross River. Further, the amount of any loss is likely to be modest and not capable of calculation. Indeed, I consider that Mr Caplan effectively accepted the overriding difficulty in carrying out such a calculation when he submitted in his reply that, in this case, an assessment of loss based on a comparison between two different liquidations was “simply not possible”.
86.	I am, of course, aware that when the matter was before me on 17th February 2012, I ordered Mr Barnett to make an interim payment to Ross River of £450,000 on account of his alleged liability to pay equitable compensation. On that occasion, I gave my reasons for assessing the figure of £450,000 as an appropriate figure to be paid on account of the likely amount of Mr Barnett’s liability. Since that order was made, the question of Mr Barnett’s liability has been considered in detail at a two day hearing. That hearing allowed the parties to raise a large number of matters which I have had to consider and not all of those matters had been fully examined at the earlier hearing. Further, because I considered that the arguments were complex and in many respects unusual, I reserved this judgment to allow me proper time to reflect on all the many points in play. Having considered the matter in detail, I have now reached the conclusions expressed in this judgment which differ from the views I expressed on 17th February 2012. Nonetheless, this judgment contains my fully considered final conclusions and I must give effect to those conclusions rather than any earlier views which I have expressed.
87.	My conclusion is that Ross River has not established an entitlement to be awarded any equitable compensation against Mr Barnett.
The result in relation to Mr Barnett
88.	The result in relation to the claim against Mr Barnett is that I make no order as to the payment of equitable compensation by Mr Barnett.