Justin Mitchell Cohen v Paul Morrison & Ors

On strike-out and reverse summary judgment applications, a claimant alleging loss of a chance must plead facts showing that the chance existed. The claimant must prove, on the balance of probabilities, what he would have done. The court may then assess what third parties might have done as a loss-of-chance question. A claimant cannot rely on a theoretical opportunity which he rejected, or on the hope that disclosure will reveal a viable case.

A quasi-partnership does not, without more, create fiduciary duties between its participants. Directors ordinarily owe fiduciary duties to the company, not to shareholders personally. A solicitor acting for one party to a transaction does not ordinarily owe fiduciary or tortious duties to another party without a specific assumption of responsibility. Contractual claims may proceed despite the absence of recoverable loss.

The claimant invested in Apollo Branded Content Group International and later sought to recover investment losses and lost profit from its directors, its solicitor and the solicitor’s firm. He alleged deceit, unlawful-means conspiracy, negligence, breaches of fiduciary duty, dishonest assistance and breach of contract.

The defendants applied to strike out the Particulars of Claim or obtain reverse summary judgment. The central issues were whether the tortious claims pleaded an arguable causal loss, whether the alleged relationships could give rise to personal fiduciary or tortious duties, and whether the contractual information claim should survive.

The application was heard in the High Court’s Business List.

1. Disposition. The tort claims in deceit, conspiracy and negligence were dismissed. The fiduciary claims and the dishonest-assistance claim were also dismissed or summarily determined against the claimant. The contractual claim under the 2018 SPA survived. A further hearing was required to determine what information and documents were covered by the contractual obligation.
2. Causation and loss of chance. A loss-of-chance formulation does not remove the need to plead and prove factual causation. The claimant had to identify what he would have done absent the alleged wrongdoing, the conduct of any relevant third party, and the outcome said to have been lost. His case concerning the 2019 Option Agreement was fanciful because he said he withdrew after learning that the shares were worth more, yet contended that he would have completed the sale at the lower price if the information had been disclosed. His proposed third-party sale case also failed because he had repeatedly rejected available offers and no buyer had emerged at his required price.
3. Fiduciary duties. A quasi-partnership does not itself create fiduciary obligations between participants. Such duties require facts establishing a relationship of trust and confidence. An agent is not necessarily a fiduciary. The proposed sale-assistance arrangement did not involve any power to commit the claimant to a transaction or any reposed trust and confidence.
4. Solicitor’s duties. Mr Reid acted for the company and the first and second defendants. His assistance in negotiations, mediation and discussion of price did not amount to an express or implied retainer, voluntary assumption of responsibility or fiduciary undertaking towards the claimant. The same pleaded facts did not establish a common-law duty of care.
5. Directors and shareholders. Directors ordinarily owe fiduciary duties to the company. A personal duty to a shareholder arises only in special factual circumstances involving a specific undertaking or assumption of responsibility, reliance and sufficient proximity. No such facts were pleaded.
6. Dishonest assistance and costs. Although the court assumed for the application that the directors might have breached duties owed to the company, the claimant could not establish a causative loss for an equitable compensation claim. The court invited submissions on indemnity costs in light of the serious fraud allegations. The time for applying for permission to appeal was extended under CPR 52.12(2)(a).