Melissa von Westenholz & Ors. v Marcus Gregson & Anor.

The court considered competing trust theories (express, resulting and constructive) and a range of tortious claims (including dishonest assistance, inconsistent dealing, the Guardian Trust principle, breach of fiduciary duties and several economic torts) arising from subscription payments of £150,000 said to have been made by Mr Michael Sanders for 80,000 shares in All Star Leisure/All Star Leisure (Group) Limited. The judge found that, on the balance of probabilities, an express trust arose by virtue of an exchange of emails on 12 July 2011 so that Mark von Westenholz held 80,000 disputed shares on trust for Mrs Sanders, Milly and Rupert in the proportions 10,000/45,000/25,000 respectively; separately a resulting trust arose in respect of the 60,000 shares paid for by Mr Sanders and issued to Mark. The defendants were not liable for dishonest assistance or for the economic torts, but they were held liable under the Guardian Trust principle and for breach of fiduciary duties for allowing ASLG to retain the £400,000 dividend paid in May 2018 rather than safeguarding it for the claimants. The defendants were ordered to account £400,000 to the three successful claimants in the stated proportions.

Background and parties. The claimants were the personal representative of Mr Michael Sanders (deceased) together with Mrs Thalia Sanders, Mr Rupert Sanders and Ms Melissa von Westenholz. They alleged that between 2005 and 2008 Mr Sanders paid £150,000 to subscribe for 80,000 shares in companies in the All Star Leisure group but that the shares were registered in Mark von Westenholz's name. The two defendants, Marcus Gregson and Daniel Evans, were non-executive directors of the holding company ASLG who became involved in managing the group after Mark disclosed extensive unauthorised withdrawals arising from gambling losses. The claimants sought recovery of the £400,000 dividend attributable to the disputed shares, together with interest and costs.

Nature of the claim and issues. The claim included multiple heads: (i) trust-based claims (express trust, resulting trust, constructive trust; dishonest assistance; inconsistent dealing; and liability under the Guardian Trust principle); and (ii) economic torts (procurement of breach of contract, causing loss by unlawful means, unlawful and lawful means conspiracy). Important subsidiary issues included whether relevant bank statements and documentary evidence were known to ASLG in 2014–2016 and whether the defendants acted dishonestly or in breach of their duties as directors.

Evidence and procedural posture. The trial was at first instance and hearings took place in October 2022. The judge noted gaps in the documentary record (notably some bank statements and final signed documents) and evaluated witness credibility, accepting that Mark von Westenholz admitted dishonesty in the past but treating his evidence cautiously where inconsistent with documents.

Court's reasoning and findings.

• Resulting trust: the court concluded Mr Sanders paid for 60,000 shares which were issued to Mark and that, as Mr Sanders did not intend to make a gift to Mark, a resulting trust arose in favour of Mr Sanders as to those 60,000 shares.
• Express trust: an exchange of emails in May–July 2011 evidenced Mark's acknowledgement that 80,000 shares belonged beneficially to Mr Sanders or his family and an intention to transfer them; accordingly, from 12 July 2011 Mark held 80,000 shares on express trust for Mrs Sanders (10,000), Milly (45,000) and Rupert (25,000).
• Constructive trust: no specifically enforceable contract for the sale of the shares was found, so a constructive trust based on specific performance did not arise.
• Dishonest assistance and inconsistent dealing: the defendants assisted in the creation of charges and accepted transfer of the disputed shares but, applying the Ivey test for dishonesty and assessing what they knew and their motives, the court found their conduct was not dishonest by ordinary standards; the inconsistent dealing claim failed for lack of pleaded constructive knowledge.
• Guardian Trust principle and fiduciary duty: the court found the defendants had sufficient notice from March–May 2018 of the Sanders' claim and nonetheless permitted ASLG to retain the dividend in disregard of that claim; they therefore became liable under the Guardian Trust principle and for breach of fiduciary duties (conflict between trustee role and director duties).
• Economic torts: claims based on procuring breach of contract, unlawful means and conspiracies were rejected for lack of requisite knowledge, unlawful means or predominant intention to injure; defendant conduct was primarily undertaken in good faith to preserve the company.

Outcome and remedy. The court ordered equitable compensation of £400,000 to be accounted for by the defendants to the three beneficiaries in the express trust in the proportions set out above, with entitlement to interest from 25 May 2018. The judge indicated parties should make submissions on interest, consequential relief and costs if not agreed.

Claim succeeded in part. The court held that an express trust arose from 12 July 2011 so that Mark held 80,000 disputed shares on trust for Mrs Sanders (10,000), Milly (45,000) and Rupert (25,000). The defendants were not liable for dishonest assistance or the economic torts, but they were liable under the Guardian Trust principle and for breach of fiduciary duties for permitting ASLG to retain the £400,000 dividend despite notice of the Sanders' claim; accordingly they must account the £400,000 in the stated proportions. The court apportioned equitable compensation and left interest and costs to subsequent submissions.