Courtwood Holdings S.A. v Woodley Properties Ltd & Ors

A knowing-receipt claim requires the claimant’s property to have been transferred to the defendant in breach of trust or fiduciary duty. Earlier breaches which merely cause or precede a valid disposition do not suffice. A receiver selling as the mortgagor’s agent can transfer the mortgagor’s freehold, subject to the mortgage, and the sale is not an exercise of the mortgagee’s statutory power of sale where the receiver acts under the legal charge. A party entrusted with management of another’s property may owe fiduciary duties of loyalty even though the contract also imposes duties of skill and care. The claim failed because the receiver’s sale to the purchaser was not alleged or found to be a breach of duty, although breaches by the property manager were established on other matters.

Courtwood, as assignee from Sandford Farm Properties Ltd, sought to recover profits from the development and sale of Sandford Farm. It alleged that Wharf Land Investments Ltd, the project manager, owed and breached fiduciary duties, and that the defendants were liable in knowing receipt of the land or its proceeds.

The court found that Wharf owed fiduciary duties and had breached them in specified respects, including by procuring an improper payment and by encouraging steps towards an insolvency process. The central questions were whether those breaches procured the sale to Woodley, whether Woodley received SFPL’s property, and whether the knowing-receipt claim was barred because the disposition itself was not a breach of trust or fiduciary duty.

1. Fiduciary duties. Wharf was entrusted with managing SFPL’s single-purpose property project while SFPL’s formal directors were dependent on its advice and practical management. That relationship imposed duties of loyalty. Contractual duties of skill and care were not inconsistent with fiduciary duties; they addressed different concerns.
2. Breaches. Wharf breached its fiduciary duty by procuring the payment to Ultramarine for Mr Maggs’ benefit without informed consent. It also breached its duty by encouraging Abbey to appoint an office-holder and by presenting a winding-up petition to advance Wharf’s own interests. Its assertion that WDL owned the planning application and related intellectual property was misleading and disloyal. Those matters did not procure the sale to Woodley: the Receivers acted independently, and Woodley’s offer was accepted because it was the highest and was recommended by Savills.
3. Property and receivership. SFPL remained the legal and beneficial owner of the freehold despite Abbey’s charge. The Receivers acted as SFPL’s agents under the legal charge and exercised a contractual power of sale, not Abbey’s statutory power under s 101 of the Law of Property Act 1925. Woodley therefore acquired SFPL’s freehold, discharged from the existing charge.
4. Knowing receipt. Applying Brown v Bennett [1999] 1 BCLC 649, the disposition to the recipient must itself be in breach of trust or fiduciary duty. It is insufficient that antecedent breaches caused or were intended to cause a later valid disposition. The Receivers’ sale was not itself impugned, so the knowing-receipt claims failed. The court did not need to determine the precise receipts or the defendants’ knowledge.
5. Disposition. The claims against all defendants were dismissed, including the claims for judgment in default against Mr Maggs and Night Rhythm. No declaration was made against Wharf.