Endcape Limited v Musgrave Generators Limited
[2022] EWHC 2972 (Ch)
MARK JULIAN O’BRIEN v SIMON PHIPPS
15 May 2023
[2023] EWHC 1153 (Ch)
High Court
Two friends had a business falling out. One claimed the other promised him half the shares of a successful US company. The judge believed the promise was made and the friend who didn't get the shares won. The other friend's counter-arguments were rejected.
Key Facts
- •Mr. O'Brien and Mr. Phipps were close friends and business associates involved in several insurance-related ventures.
- •Dispute arose over Mr. O'Brien's claim that Mr. Phipps held half of his shareholding in Shortfall LLC (a US company) on an express oral trust.
- •Mr. Phipps claimed that there was a Profit and Loss Sharing Agreement (PLSA) between them, and counterclaimed for breaches of that agreement.
- •The trial involved oral evidence from several witnesses and a review of documents.
- •Central issue was whether Mr. Phipps made an express oral declaration of trust at a Harvester restaurant meeting in August 2013.
Legal Principles
The burden of proof for a trust lies on the claimant, on the balance of probabilities.
None explicitly stated, but implied throughout the judgment.
Assessment of oral evidence from witnesses recalling events years ago must consider the unreliability of memory and potential biases.
Gestmin SGPS S. v. Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) and Smith v Secretary of State for Transport [2020] EWHC 1954 (QB)
No technical expressions are necessary for the creation of an express non-charitable trust. The settlor must externally manifest an intention to create a trust.
Underhill and Hayton, Law of Trusts and Trustees, 20th ed., 10.1
A fiduciary relationship arises when one party undertakes to act for or on behalf of another in circumstances giving rise to trust and confidence.
Bristol & West Building Society v Mothew [1998] Ch. 1 at 18
Outcomes
The claim for breach of trust succeeded.
The judge found that Mr. Phipps made an express oral declaration of trust at the Harvester meeting in 2013, intending to transfer 50% of his Shortfall shares to Mr. O'Brien. This was supported by email correspondence and the judge's assessment of witness credibility.
The counterclaim based on the alleged Profit and Loss Sharing Agreement failed.
The judge found that the alleged PLSA was implausible and not supported by the evidence. The judge's reasoning details the implausibility of the PLSA and explains why evidence presented did not prove its existence.