3VB Success in Complex Commercial Litigation

On 18 November 2022, Freedman J handed down judgment in Horlick & ors v Cavaco & ors [2022] EWHC 2935 (KB) following a trial spanning two weeks in May 2022 in which the judge dismissed a number of substantial claims. Judgments following several of the prior interlocutory applications have also been reported: see [2022] EWHC 1888 (QB) (concerning the Claimants disclosure) and [2022] EWHC 1167 (QB) (one of the leading decisions on the use of video link evidence at trial).

Freedman J’s judgment is a must-read for practitioners, touching as it does on issues at the forefront of contemporary commercial practice, including the interaction between unjust enrichment claims and contracts, Braganza duties, and the running of limitation periods in invoice claims.

The proceedings arose out of a longstanding venture to develop mines in Mozambique. The primary claimant was Mr Timothy Horlick and his wholly owned management consultancy company, Development Capital Limited (DCL). A claim was also brought by Mr Horlick and a Mr Gayford, as trustees of a trust for Mr Horlick’s children, which had also invested in the venture.

There were five defendants. However the first and third defendants (Mr Cavaco and Companhia Mineira do Chibuto SA) did not take part in the proceedings and had judgments entered against them. The fifth defendant (Pathfinder Minerals Plc) was never served with the claim and also took no part in the proceedings. At trial, therefore, the two active defendants were the second and fourth defendants, two Mozambique companies: JV Consultores Internacionais Limitada (JVC) and Pathfinder Moçambique SA (PMSA). JVC was the family investment company of the Veloso family, who had obtained mineral mining licences. PMSA was the intended project company.

The most valuable claim was a claim for c.£1.3 million in unjust enrichment by Mr Horlick against PMSA. Mr Horlick alleged that funds that had been the subject of a loan made to Mr Cavaco had been paid for PMSA’s benefit and so could be recovered from the company on the ground that there was a failure of basis when Mr Cavaco did not repay the loan.

The judge rejected that claim holding that the contractual framework excluded any claim in unjust enrichment, and in do so reviewing in detail the recent caselaw on the circumstances in which subsisting contracts exclude unjust enrichment claims, including Dargamo Holdings v Avonwick Holdings [2021] EWCA Civ 1149; Barton v Gwyn-Jones [2019] EWCA Civ 1999 and Costello v MacDonald [2011] EWCA Civ 930. The judgment adds to the caselaw in this rapidly developing area which is firmly in the sights of the Supreme Court, that court having recently heard an appeal in Barton. Given the complex caselaw in this area, practitioners will be thankful for the judge’s clear summary of the principles at paragraph 213 of his judgment.

The second most valuable claim was DCL’s claim to £750,000 as a success fee under an engagement agreement. PMSA had engaged DCL (in reality, Mr Horlick) to raise finance for the mining venture. Although Mr Horlick failed to raise the finance, DCL claimed the success fee on the ground inter alia that PMSA was under an implied duty not to act irrationally or arbitrarily in rejecting offers of funding and that PMSA had so acted in rejecting an offer of funding from the Renova group in 2015.

The judge rejected that claim on several bases, but most significantly that there was no implied duty. The judge surveyed the caselaw since the leading Supreme Court decision in Braganza v BP Shipping Ltd [2015] UKSC 17. Again, practitioners will find useful the judge’s summary of the law in this area at paragraph 175 of his judgment. The judge concluded that a Braganza duty could not be implied because the engagement conferred an absolute right commercially to accept funding offers, not a discretion.

DCL also claimed reimbursement of expenses totalling c.£116,000 under the engagement agreement but that claim failed as well. In addition to holding that DCL had not properly evidenced its expenses, the judge held that the claim was limitation barred. DCL could not rely on the service of later invoices because time began to run the moment the expenses were incurred. The judge considered the complex case law relating to when causes of action accrue for limitation purposes where payment is to be made against invoices, holding that the issue turned on whether the service of an invoice was a true condition precedent to liability.

The only claim which succeeded was the trust’s claim to £225,000 from JVC under a loan agreement entered into in March 2012 jointly with Mr Cavaco. The judge did not accept JVC’s defences that the trust was estopped from bringing the claim under the loan, that its liability had been discharged by subsequent dealings with Mr Cavaco or that JVC could rescind the loan agreement as a result of secret commissions alleged to have been paid to Mr Cavaco.

Matthew Watson and Chinmayi Sharma acted for the Second and Fourth Defendants, instructed by Tim Constable, Sarah Rutnah and Eleanor Dempsey of Dentons UK & Middle East LLP.

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