Nicholas Sutton, a former young property personality of the year, has been criticised by a High Court judge for a serious breach of fiduciary duty in respect of a £50m agreement to sell Fulham FC’s Craven Cottage stadium for housing.
Peter Smith J ruled that Sutton had breached his fiduciary duty as a director of property developer Crown Dilmun (Crown) and as group partner of Dilmun Investments Ltd (Dilmun) by obtaining the opportunity to redevelop Craven Cottage for rival developer Fulham River Projects Ltd (FRP).
The judge found that FRP was implicated in the breach of duty owing to its actual knowledge of the dishonesty. He ordered both Sutton and FRP to account to Crown and Dilmun for any profits arising out of the agreement.
The judge said that the dispute had arisen out of the September 2002 conditional contract between the vendor, Fulham Stadium Ltd, the vendor’s guarantor, Harrods Holdings Ltd, and FRP, under which the vendor agreed to sell Craven Cottage for £50m exclusive of VAT, plus any overage payment.
FRP paid a £15m deposit for the site, which it planned to develop to provide at least 240,000 sq ft of housing.
The claimants issued proceedings against Sutton, alleging that he had acted dishonestly in breach of the fiduciary duties that he owed to them as a director. The companies argued that Sutton had caused the sale of the stadium to be diverted to FRP, rather than having obtained the benefit of the opportunity for Crown.
They also sued FRP for dishonest assistance in breach of trust or knowing receipt of trust property.
Allowing the claim, Peter Smith J said that Sutton had told a significant number of lies in his testimony, and had shown a “minimal understanding of his duties and responsibilities and possibilities of conflict”.
The judge found that Sutton had been obliged to exploit the opportunity for the benefit of Crown. Rejecting Sutton’s defence that Crown would not have been interested, the judge said that he could not have had a bona fide belief that this would have been the case.
He held that FRP had knowledge of Sutton’s breach to a reckless and dishonest degree because, by virtue of Sutton’s £100,000 investment in the scheme, he was “intimately concerned” with its business. It followed that FRP had participated in the breach of duty.
References: EGi Legal News 26/1/04
