Chauvidul- AW v Phongphongsavat & Anor

A claimant may establish participation in an initial joint venture through the parties’ conduct and contemporaneous documents, but a later entitlement to shares or business assets requires proof of the relevant agreement. An agent’s assertion of authority cannot itself create ostensible authority. The principal must have made a representation of fact, the third party must have relied on it, and the apparent authority must arise from the principal’s manifestations or the usual authority of the agent’s position. Very late amendments may be allowed, but the court must balance the risk of injustice to the applicant against prejudice to the other party. A constructive trust claim requires pleaded facts establishing the relevant trust or fiduciary relationship.

The claimant alleged that she, the first defendant and another individual operated a video-streaming venture and agreed that each would receive an equal share. She sought contractual relief, rectification of the second defendant’s register under section 125 of the Companies Act 2006, a declaration of partnership, and an account of profits.

During the trial she sought permission to amend to rely on ostensible authority and a constructive trust. The central issues were whether an initial agreement existed, whether a later agreement transferred or created a one-third interest in the business, whether the first defendant was bound by the alleged agent’s statements, and whether the late amendments should be permitted.

1. Initial venture. The claimant proved, on the balance of probabilities, an initial agreement with the third party that the video-streaming business would be carried on through the claimant’s company and that they would each have a 50 per cent share. The documents, payments, correspondence and the claimant’s active role supported that conclusion.
2. Later arrangement. The claimant failed to prove that, in April or May 2008, she was promised a one-third share in the second defendant or in the continuing video-streaming business. The evidence established that the original company was dissolved and that the business would continue through the second defendant, but did not establish the extent of any promised shareholding. The first defendant had not agreed to confer such an interest.
3. Late amendment. Applying the principles drawn from Swain-Mason v Mills & Reeve [2011] EWCA Civ 14 and Worldwide Corp v GPT [1998] WL 1120704, the court permitted the late amendments. The court has power to allow an amendment at any stage, but a very late amendment carries a heavy burden. The competing risks of injustice and prejudice must be balanced. Here, any prejudice to the defendants was minimal.
4. Ostensible authority. The amended agency case failed. The pleading did not identify a representation made by the principal. A representation by the alleged agent about his own authority could not, by itself, create apparent authority. Nor was there evidence that the first defendant represented that the agent could bind him regarding ownership of the company or business.
5. Trust claim and disposition. The constructive trust claim was inadequately pleaded and no fiduciary relationship was established. The claimant also failed to prove a post-May 2008 partnership or entitlement requiring rectification. The contract, rectification, partnership and trust claims failed, and the action was dismissed.