[2025] EWHC 2054 (Ch)

Simon’s evidence is that, even if (as I have held [40-46]) the intention in 2017 was to create two entirely independent businesses, that intention was not followed through and there has never been an effective separation of the businesses at North Cowton on the one hand and Allerton Grange on the other. He says that in November 2017 the obligation to repay the Lloyds Bank loan and overdraft was nominally divided between and allocated to the partnerships operating at North Cowton and Allerton Grange, not to fix each part of the business with a distinct share of the liability but to allow both parts of the business in the short term to service an element of that debt and to operate separately on a day-to-day basis. He says that no consideration was given at that time as to how each of the two farming units would contribute to the repayment of the Lloyds borrowing.

I consider that there is force in what Simon says. Richard’s agreement in 2017 to assume responsibility for £500,000 of the Lloyds loan and £125,000 of the Lloyds overdraft has to be seen in the context of combined Lloyds borrowing amounting to some £2.7 million at that time, comprised of the following: (i) the Lloyds loan of £1.978 million; (ii) the Lloyds overdraft of £457,675 and (iii) merchant debt (being liability incurred to suppliers of both North Cowton and Allerton Grange) of £274,344. The allocation of £500,000 of the loan liability and £125,000 of the overdraft liability to the North Cowton business left the Allerton Grange business bearing £1.478m of the loan liability, £332,675 of the overdraft liability and the entirety of the merchant debt liability, although the effect of Lloyds’ all monies charge was that all debts due to Lloyds remained secured over North Cowton.

Simon’s evidence is that if the merchant debt is added to the bank debt, the 2017 division of the two farming businesses resulted in the North Cowton unit carrying 23% of the debt and the Allerton Grange unit carrying 77% of the debt. Simon says it is obvious this was not intended to be a permanent allocation of liabilities between the units.

Simon then refers to the valuation report of the single joint expert, Mr Rodney Cordingley, which values North Cowton and Allerton Grange at the date of Alan’s death (5 October 2020) at, respectively, £2.838 million and £2.245 million, with a valuation of the Marton land at the same date of £602,000. He points out that, if the Allerton Grange and Marton land values are combined, they broadly equate to the North Cowton valuation (a difference in Allerton Grange’s favour of only £7,000). Moreover, the expert’s valuations at the date of his report (19 January 2024), which assumed no improvements have been made to those properties since Alan’s death, are £3.128 million for North Cowton, £2.365 million for Allerton Grange and £663,000 for the Marton land. Again, the total of the Allerton Grange and Marton land values broadly equates to the value of North Cowton (a difference this time in North Cowton’s favour of £100,000).

Simon points out that the informal split of the businesses agreed in 2017 left North Cowton with 23% of the combined debts, despite (in October 2020, the earliest available valuation date) North Cowton accounting for 49.92% of the combined value of the land occupied by the two businesses, whereas Allerton Grange was left with 77% of that debt despite Allerton Grange and the Marton land accounting for 50.08% of the combined value of the land occupied by the two businesses.

Simon then refers to the combined Lloyds borrowing of the Allerton Grange and North Cowton businesses in December 2024 which was approximately £3.02 million, made up of (i) Allerton Grange bank debt (loan and overdraft facility) of £2.14 million, (ii) merchant debt of £274,344 (the actual figure being £929,429 but the difference being conceded by Simon as only for the benefit of the operation at Allerton Grange) and (iii) North Cowton bank debt (loan and overdraft facility) of £604,628. Using the most recent expert valuations obtained for trial, he calculates that, on the face of the current allocation of debt, North Cowton has 20.02% of the combined value of the debts, despite accounting for 50.81% of the value of the two farms, whereas Allerton Grange has 79.98% of the combined value of the debts, despite Allerton Grange and the Marton land representing 49.19% of the value of the two farms. In addition, Simon expresses the view that North Cowton has the ability to generate more income as a result of its larger area of arable land.

In July 2021, Simon and George obtained a loan of £250,000 from Lloyds to fund a new shed at Allerton Grange which is secured by Lloyds’ all monies charge over (amongst other assets) North Cowton. The amount outstanding under this loan is now approximately £200,000. Simon and George have further debts: an outstanding unsecured Lloyds bounce back loan of some £15,000, a loan from Oxbury Bank Plc of some £200,000 and liabilities to Barclays in respect of another business known as Susacres totalling some £40,000.

Simon refers to the 2023 accounts for the Allerton Grange unit which show a gross pre-tax and pre-drawings profit of £334,253. However, he says that the fall in pig prices over the last 12 months has reduced gross income from pig sales by £237,500, leaving a gross profit of £45,000 for each of the two families who farm at Allerton Grange.

It is Simon’s evidence that, since its purchase in late 2011, the Marton land has been farmed as part of the Allerton Grange unit and that Richard has never visited it. He has disclosed documents which show that A&M Armstrong & Sons took out a Barclays loan in the sum of £400,000 in order to fund the acquisition of the Marton land for £420,000. He says that although the Marton land was subsequently registered in the names of Alan, Margaret, Richard and Simon in January 2016, this was done to reflect advice given by Grant Thornton some 10 years earlier regarding the need for him and Richard to have an interest in partnership property. The Marton land was charged to Lloyds Bank in January 2016 as part of the security for the Lloyds loan (the remaining security being North Cowton and part of the land at Allerton Grange).

Simon says that when Richard was given day-to-day control of North Cowton (which took effect from 1 November 2017), the Marton land remained as an asset in the accounts of the Allerton Grange partnership which continued to be called A&M Armstrong & Sons.

Simon also disclosed a document provided to his solicitors by Mr Thomas, the family accountant, after the liability judgment had been handed down. This document contains Mr Thomas’s typed notes of (i) a meeting he had with Alan and Margaret on 16 October 2017 and (ii) further discussions he had with Simon and Richard the following morning, 17 October 2017 (“Mr Thomas’s October 2017 notes”). I recorded at [170] Mr Thomas’ evidence that he did not take contemporaneous notes of conversations he had with the family, instead relying on the farm accounts as recording the outcome of any financial discussions with the family to which he was a party. At least in relation to his discussions with members of the family on 16 and 17 October 2017, Mr Thomas’s recollection was plainly mistaken.

So far as relevant, Mr Thomas’s October 2017 notes state as follows:

“DT meeting with Alan & Margaret Armstrong-16.10.17

Meeting re forming a new partnership of Alan, Margaret & Richard, the existing partnership will continue just with Richard retiring from the partnership.

The idea being that Cowton & Allerton are split and Simon & Richard can farm their own ways!

Alan & Margaret will still own most of the land for APR purposes.

The new partnership will be run on a day-to-day basis by Richard and he will have control of a new bank account as from 1.11.17.

Due to the current troubles with the release of monies from the solicitors (2.7M roughly) it is not yet advisable to split the farms on a financial basis due to the debts etc. The idea is that as of 6.4.18 all money should have been received and farm debts all settled, apart from HP etc. This then gives Simon and Richard a clean slate as it were. …

A further meeting will be made later in the year to discuss things further and establish where the client is with regard to the 2.7 M. …

DT

17.10.17

**** NEW NOTE AFTER DISCUSSIONS WITH SIMON & RICHARD ****

Spoke to Simon & Richard this morning (17.10.17) and it runs [sic] out Alan had not told me everything!!!

Simon is owed approx. 1M+ from the golf course monies. Part of his share put in (30 acres of woodland etc) all done re the divorce. Alan will not have much if anymoney leftover after debts cleared and Simon paid his share.

Richard is to take on 500k of the 2M bank loan and will set himself up with a 125k overdraft - he will walk away from the business and take no money from the golf course money to be recd. He will keep various assets, land & buildings (mostly in A&M names), stock, P&M etc – List & values to be agreed at a later date and tfrd across.

The date of the split is to be 1.11.17 NOT 6.4.18 as stated above, Richard might have some tax debt in the old partnership but this will get sorted later. New partnership is to include Richards son Thomas. Kath is to set up the new VAT, we are to set up the new partnership.

DT

17.10.17

…

Land - 180 acres plus buildings at Allerton, 270 acres plus buildings at Cowton”

Richard’s solicitors disclosed copies of two bank statements showing the indebtedness of the North Cowton business as being £604,628.35 as at 17 December 2024. In his evidence Richard relied on Mr Thomas’s October 2017 notes and in particular on Mr Thomas’s reference to the split of the two farms in 2017 with Richard taking on £500,000 of debt by way of a loan and an overdraft of £125,000. He says that, as Mr Thomas’s October 2017 notes indicate, it was anticipated that the Armstrong share of the proceeds of the golf course (“the golf course monies”) (estimated at that time to be worth £2.7 million) would be released within a few months.

I refer to the golf course venture at various places in the liability judgment ([24], [25], [50], [67], [77.2], [142.12], [143], [204]). In summary, there is a dispute between the partners to the golf course venture - which comprise members of the Armstrong and Mattocks families - as to how the proceeds of the venture are to be divided. That dispute has been the subject of protracted correspondence and (it appears) litigation. Some of the correspondence was in the trial bundle (for example, a letter dated 31 March 2022 from Brian Mattocks’ solicitors, Harrowells, to the solicitors for each of Simon and Richard). However, the details of the dispute are unclear and (it would appear) the dispute has yet to be resolved. If there has been litigation, none of the documents relating to the same have been disclosed. The dispute is not before the court and it is not possible to draw any safe conclusions as to its likely outcome. At least part of the dispute appears to involve claims by Mr Mattocks that Simon and Alan were liable to him for sums alleged to have been dishonestly misappropriated during the golf course venture. I have no means of judging the veracity or otherwise of such claims.

There is a further dispute between Simon and Richard concerning the division of the golf course monies ultimately found to be due to the Armstrong side of the partnership. Simon alleges, and Richard denies, that when the North Cowton and Allerton Grange businesses were split in 2017, Richard agreed to relinquish his entitlement to any of the golf course monies. Again, I have not been asked to resolve that dispute.

Richard says that the intention at the time the businesses were split was that the Armstrong share of the proceeds from the golf course venture (then estimated as being £2.7 million) would be used to repay the debts of both farms (being approximately £2 million in 2017) so that, as Mr Thomas says in his note of his meeting with Alan and Margaret on 16 October 2017, they would all have a “clean slate” with both farms free of debt. According to Richard, it was expected that there would be a considerable surplus to be divided up between them. He refers to Mr Thomas’s note of conversations with Simon and Richard on 17 October 2017 where it states that £1M+ was to be paid to Simon to compensate him for some woodland and emphasises that this was not said in his presence and he did not agree to it.

Richard says that, without his knowledge or agreement, in 2021 Simon and George took out the loan from Lloyds Bank for £250,000 (referred to in paragraph 17 above) which was secured by the Lloyds’ all monies charge over (amongst other assets) North Cowton. He also says he is aware that Simon sold a parcel of land near Allerton Grange shortly after the farms were split in 2017 for approximately £2 million and that he (Richard) did not receive any of the proceeds. He thinks £250,000 of the proceeds went to Kathryn and the balance to Simon. Richard also refers to his belief that Simon has sold other parcels of land near Allerton Grange for a road widening scheme although he has no details of this. His belief is that Simon has had every opportunity to reduce or even extinguish the debt that existed over Allerton Grange in 2017 even without the golf course monies. He refers to Simon having built five barns at Allerton Grange at a cost of approximately £200,000 for each barn which he considers indicates that Simon has substantial funds to invest. He expresses his frustration that since 2017 Simon has removed over £100,000 worth of farming equipment from North Cowton that he will not return and has retained the rent received from letting out the cottage at North Cowton, as well as preventing him from receiving farm subsidy payments of some £80,000.