BL-2021-002293 - [2025] EWHC 678 (Ch)

On the first day of the hearing, when the defendant opened the summary judgment application, I heard submissions from Mr Goodfellow on the arguability of the plea that Mr Flohr owed the claimant an implied duty of good faith and fiduciary duties. Mr Goodfellow succinctly argued that such duties were not arguable. Sir Geoffrey responded on these points. Without formally conceding the issue, the defendant elected not to make a reply on them. In those circumstances, and where the application is to be disposed of on limitation grounds, I will explain my decision on the point more concisely than I would if it were to be the basis of determination of the application.

In the Bates decision, Fraser J set out at [725] a non-exhaustive list of characteristics relevant to the question whether a contract is relational such that a duty of good faith can be implied, entailing that the parties must refrain from conduct which would be regarded as commercially unacceptable by reasonable and honest people:

A summary of the factors governing the existence of a fiduciary duty in a commercial relationship was set out by Nugee J in Glenn v Watson [2018] EWHC 2016 (Ch) at [131]. He said that it is difficult to identify the circumstances justifying the imposition of a fiduciary duty because the courts have declined to provide a definition or uniform description, and that ‘joint venture’ is not a term of art. Such duties will not readily be found in commercial settings. Factors (7) and (9) may be material here:

Mr Goodfellow argued that on analysis of the documentation and, in particular, the consultancy agreement made with Mr Flohr’s services company, there is no room for the implication of a requirement of good faith. That, he said, is the prism through which the question should be asked, and not whether there was a ‘relational’ contract. Mr Flohr’s role was as a non-executive director, and was only strategic. The duty must be assessed as at the date of the agreement, and not in reliance on subsequent events. Mr Goodfellow also submitted that the terms of the SSA, the consultancy agreement and Mr Flohr’s statutory duties as a director provided adequate protection, and left no room for the implication of a term, on established principles, of good faith. By reference to the terms of the SSA, he submitted that there were a whole range of contractual provisions to ensure that the investors and the claimant would participate in how the business was to be operated. Going through them, he submitted that they provided for a high level of governance to ensure that matters were operated appropriately. Similar considerations are then said, on analysis, to be inconsistent with an objective intention for there to be an implied duty of good faith, especially when there are references in the schedules to the SSA to the good faith determinations of the board.

As far as fiduciary duties are concerned, Mr Goodfellow submitted that this is not a case like Glenn v Watson, where a fiduciary duty was held to exist in certain respects where the defendant controlled a relationship with a third party, and was intended by the parties to use that relationship for the benefit of the joint venture (see, e.g., at [439]). The core need for the fiduciary to be acting on behalf of the other party, in what may be akin to an agency relationship, does not arise on these facts. Mr Flohr was also not in control of Comprendium UK. The existence of trust and confidence was not enough, and it was submitted that Mr Horlick can ultimately be seen to be relying on his subjective trust in Mr Flohr at the material times.

Mr Goodfellow also submitted that a fiduciary duty would be inconsistent with the express contractual terms agreed. He cited Ross River Ltd v Cambridge City Football Club Ltd [2008] 1 All ER 1004 at [197], Briggs J, citing Hospital Products Ltd v United States Surgical Corp (1984) 55 ALR 417 at 454–455, Mason J:

It is clear that duties of good faith and fiduciary duties are not the same thing, and Fraser J recognised in Bates that the trust and confidence leading to the former will not be the same as that involved in fiduciary relationships. There is, however, a clear overlap in the factual enquiry which results from the allegation that either type of duty has arisen. It is unlikely that it would be appropriate to grant summary judgment in relation to one set of alleged duties if it were not appropriate to grant it in relation to both.

I can see that the claimant might have some real difficulty in establishing that a fiduciary duty had arisen. It is generally difficult to incorporate fiduciary duties into commercial relationships, outside their settled categories. It is pleaded that Mr Flohr and/or his agents were in operational control of Comprendium UK, but he was a non-executive director only, and the complaints about his conduct seem to be that he failed to exercise operational control. He does not appear to have been intended to have sole control of Comprendium UK; detailed duties of co-operation are included in the SSA. It is not clearly pleaded that he was contractually intended to have control over Comprendium UK, or that he was intended to have control over assets intended to be exploited for the benefit of others.

Nonetheless, it is pleaded that Mr Flohr used the control that he had to enable Comprendium UK’s assets and resources to benefit the former Comdisco companies which he had acquired, rather than to further the business of Comprendium UK. Whilst the case law shows that a fiduciary duty may not be superimposed on a contract to alter the operation of a contract, I consider that I was taken to a few snapshots of the contractual documentation rather than being presented with the entirety of the evidence which might be available at a trial. Furthermore, the case law suggests that when considering whether a fiduciary relationship came into existence the court looks outside the contractual documentation to the nature of the relationship between the parties and to the representations made between the parties whilst the relationship was being forged.

As far as the alleged duty of good faith is concerned, similar considerations apply on the question whether the matter can be dealt with summarily, even though the factors tending towards the existence of the duty are different. I do not doubt that the points identified by Mr Goodfellow would not be easily surmounted at trial, but I am not persuaded that this prospect is only fanciful.

Sir Geoffrey submitted that each of the factors identified by Fraser J in Bates at [725] are present. Emphasis could be placed on the long-term nature of the contract, the requirement in the SSA for loyalty and integrity, the degree of collaboration and co-operation required and the significant financial investment made by both sides. Furthermore, it might be said (contrary to the defendant’s submission) that the overriding question to be asked when it is said that a duty of good faith has arisen is whether the contract is relational. The factors identified by the case law go to that issue, and it cannot simply be said that it is the wrong question.

The pleaded breaches also go beyond the allegation of Mr Flohr having competed impermissibly with Comprendium UK and the failure to procure business for Comprendium UK (the problems with which allegations go beyond those presently under discussion). Such substantive obligations would not easily be capable of incorporation through an implied obligation of good faith: see Quantum Advisory Ltd v Quantum Actuarial LLP [2023] EWCA Civ 12 at [48], Falk LJ. Again, however, there are pleaded breaches going beyond these duties as I have noted in relation to the pleaded breaches at paragraph 35 of the particulars of claim. These breaches relate to the alleged misuse of the assets of Comprendum UK in a way which I consider might arguably be the subject of an implied duty of good faith.

For these briefly stated reasons, I do not consider that it can be determined summarily that there would be no real prospect of a court determining at trial that there were duties of good faith and/or fiduciary duties arising in relation to the parties’ relationship. The comments I make below as to why I would not determine the limitation question summarily in relation to matters pre-dating 2013 are also material in this context. There is a wide factual canvas involved and only certain points have been identified. Both disclosure and witness evidence of fact might very conceivably be relevant to an identification of the representations made between the parties when the contractual relationship was being negotiated, and in assessing the nature of the trust and confidence reposed by or on behalf of the claimant in Mr Flohr.