On 24 February 2025, Jonathan Acton Davis KC (sitting as a Deputy Judge of the High Court) handed down judgment in Goldkorn v (1) MPA (Construction Consultants) Ltd (2) Kazu Restaurants 1 Ltd (in Liquidation) [2025] EWHC 385 (TCC), finding after a trial of Preliminary Issues that the Claimant did not have title to bring any claim against the First Defendant (the “PI Judgment”).
In a further judgment handed down on 20 March 2025, the Judge dismissed an application made by the Second Defendant to be substituted in place of the Claimant under CPR 19.6(3)(b) Goldkorn v (1) MPA (Construction Consultants) Ltd (2) Kazu Restaurants 1 Ltd (in Liquidation) [2025] EWHC 660 (TCC) (the “Substitution Judgment”). The application, which was made after the PI Judgment had been handed down, was dismissed on the basis that the Court’s discretion under CPR 19.6 should not be exercised in favour of allowing the substitution, and in any event the application was an abuse of process. The claim against the First Defendant was accordingly dismissed.
The PI Judgment
The facts
The Second Defendant (“Kazu 1”) was an SPV set up to develop a luxury restaurant in Soho, under the renowned Japanese chef Endo Kazutoshi. Kazu 1 appointed the First Defendant (“MPA”) to act as project manager for the development, pursuant to a contract dated 10 November 2016 (the “PM Appointment”).
The project was abandoned in around early 2018, and Kazu 1 entered into liquidation on 19 June 2020. Prior to its liquidation, Kazu 1 had apparently identified claims which it had against MPA for breach of its duties under the PM Appointment, said to have caused significant losses.
On 22 December 2020, Kazu 1 (acting by its liquidator) entered into a Deed of Assignment in favour of the Claimant (“Mr Goldkorn”), a former director of the company. Kazu 1 purported to assign such rights, title and interest as it had in any claim against MPA to the Claimant.
However, the PM Appointment contained certain restrictions on assignment. Recognising that these may prevent any valid assignment, on 14 February 2022 Kazu 1 (acting by its liquidator) also executed a Declaration of Trust in favour of Mr Goldkorn, declaring that that it held all rights, title and interest it had in any claim against MPA on trust for Mr Goldkorn absolutely. The Recitals to the Declaration of Trust recorded that Kazu 1 had declined to bring any claim against MPA in its own name, or to lend its name to Mr Goldkorn so that he could do so.
Mr Goldkorn issued proceedings against MPA and Kazu 1 in August 2023. He alleged that MPA had acted in breach of its duties to Kazu 1, claiming damages of c. £3m. His primary case was that he was entitled to bring the claim as Kazu 1’s assignee pursuant to the Deed of Assignment. His alternative case was that he was the beneficiary of Kazu 1’s claim against MPA under the Declaration of Trust and, in circumstances where Kazu 1 (as trustee) had refused to sue, he was entitled to bring a claim against MPA directly, joining Kazu 1 as the second defendant, pursuant to the procedure set out in Vandepitte v Preferred Accident Insurance Corp of New York [1933] AC 70.
MPA denied that Mr Goldkorn had title to bring the claim, either as assignee or beneficiary using the Vandepitte procedure, on the basis that neither was permitted under the terms of the PM Appointment.
The parties agreed to have the question of Mr Goldkorn’s title to sue MPA determined as Preliminary Issues. The Preliminary Issues were tried without disclosure or witness evidence and on the basis of a Statement of Agreed Facts (including that it was not in dispute that Kazu 1 had declined to bring proceeds in its own name or lend its name to Mr Goldkorn).
Assignment
Clause 16.2 of the PM Appointment provided:
“The benefit of this Appointment may be assigned by the Client by way of an absolute legal assignment to any person providing finance or refinance to the Client in connection with the Project or to any person (A1) acquiring the Client’s interest in the Project and by A1 to another person (A2) acquiring A1’s interest in the Project. No further or other assignment is permitted and, in particular, A2 is not entitled to assign this Appointment”.[1]
MPA’s case was that Mr Goldkorn did not fall within any of the categories of permitted assignee in clause 16.2 and the purported assignment to him by Kazu 1 of its rights was therefore invalid.
Mr Goldkorn advanced three arguments:
- First, he argued that he was a “person… acquiring the Client’s interest in the Project”. This was on the basis that the development had been abandoned by the time the Deed of Assignment was entered into, and as such the only remaining interest which Kazu 1 had in the Project was the right to bring a claim against MPA. This argument was rejected by the Judge at [32] – [34]. In particular, the “Project” was a defined term in the PM Appointment, and referred to “the construction works at the site as identified in the Proposal”. Mr Goldkorn had not acquired any interest in the construction works themselves, as Kazu 1 had in fact disclaimed its lease over the premises.
- Second, he argued that the “benefit of this Appointment” referred only to Kazu 1’s right to future performance of MPA’s services, but not to Kazu 1’s right to the fruits of performance, including accrued rights of action in respect of MPA’s past breaches of its obligations. Accordingly, Mr Goldkorn said that the assignment to him of the claim against MPA fell outside the prohibition in clause 16.2 in any event. The Judge noted the decision of the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd [1995] 1 AC 85 that, while it was open to parties to agree such a distinction, in practice it was likely to give rise to difficulty and confusion, and careful and intricate drafting was required to establish that this was indeed their intention. The language used in clause 16.2 came nowhere near that threshold (at [47] – [50]).
- Third, he argued that the “benefit of this Appointment” referred only to contractual claims, and did not bar the assignment of Kazu 1’s separate and independent claim against MPA in the tort of negligence. This argument was rejected by the Judge at [56] – [57]. Mr Goldkorn’s pleaded case was that tortious duties were only owed by MPA because of its concurrent contractual duties, and the claims advanced were identical. Accordingly, the tortious claims also formed part of the benefit of the Appointment.
Mr Goldkorn did not therefore have title to bring any claim against MPA as assignee.
Declaration of Trust
It was common ground that the PM Appointment did not bar declarations of trust and that Kazu 1 may well therefore have held the claims against MPA on trust for Mr Goldkorn since February 2022.
However, clause 18.2 of the PM Appointment provided:
“Nothing in this Appointment confers or purports to confer any right to enforce any of its terms on any person who is not a party to it. Only the Client (and the Client’s permitted assignees) and the Consultant can take action to enforce the terms of the Appointment”.[2]
The Judge accepted MPA’s argument that clause 18.2 prevented Mr Goldkorn, as beneficiary, from seeking to use the Vandepitte procedure to bring proceedings against MPA in his own name. He was not the Client, and was not one of the Client’s permitted assignees specified in clause 16.2. In bringing a claim against MPA for damages for breach of the PM Appointment, he was taking action to enforce the terms of the Appointment. Accordingly, on their proper construction, the effect of clauses 16.2 and 18.2 was to prevent Mr Goldkorn from bringing the proceedings (at [67] – [69]).
The Judge did not find it necessary to address the obiter comments of the Court of Appeal in Barbados Trust Co Ltd v Bank of Zambia [2007] EWCA Civ 148, which have generated some controversy (including in the leading textbooks). That case only dealt with a non-assignment provision and did not deal with any provision equivalent to clause 18.2, which restricted who may actually bring proceedings (at [70]).
MPA accordingly succeeded on both Preliminary Issues.
The Substitution Judgment
Notwithstanding MPA’s success on the Preliminary Issues, Mr Goldkorn objected to his claim being dismissed. This was because on the same day the PI Judgment was handed down, Kazu 1 (which had previously played no part whatsoever in the proceedings) brought an application under CPR 19.6(3)(b) seeking to be substituted in place of Mr Goldkorn as claimant.
The Preliminary Issues had been agreed and ordered on the basis that Kazu 1 had refused to sue, and that if Mr Goldkorn were found not to have title then that would therefore be determinative of the proceedings. However, the premise of the substitution application was that the liquidator of Kazu 1 had since changed his mind and intended to bring proceedings after all. It was accordingly argued that, in view of the Judge’s findings in the PI Judgment, Kazu 1’s claim against MPA could not properly be carried on unless Kazu 1 were substituted as claimant, and the Court should therefore exercise its discretion under CPR 19.6 notwithstanding that limitation had expired.
The substitution application was heard at the consequentials hearing on 6 March 2025. It was dismissed with reasons to follow, and indemnity costs were awarded against Kazu 1 and Mr Goldkorn jointly and severally. Mr Goldkorn’s claim against MPA was also dismissed.
In the Substitution Judgment, the Judge made clear that while he was prepared to accept that he had jurisdiction to make an order for substitution under CPR 19.6, he declined to do so for two reasons, both of which were primarily attributable to Mr Goldkorn’s and Kazu 1’s conduct:
- First, the application was refused in the exercise of the Court’s discretion under CPR 19.6. The context for the Preliminary Issues having been agreed and ordered was Mr Goldkorn’s own application in support of a trial of Preliminary Issues, which noted that they were capable of resolving the whole proceedings if determined in MPA’s favour. The premise of the Substitution Application was that Kazu 1 had changed its mind and now intended to bring proceedings; this would have meant that the Preliminary Issues were pointless and were a waste of the parties’ and the Court’s time. The suggestion that the PI Judgment represented a material change of circumstances was rejected – the fact that Mr Goldkorn could not bring the claim himself was simply a result of the terms of the PM Appointment itself (at [18] – [26]).
- Second, and in any event, the application was refused on the ground of Henderson v Henderson abuse of process, in circumstances where there had been a clear breach of the guidelines set out in Aldi Stores v WSP Group [2008] 1 WLR 748 and Kazu 1 could, and should, have brought any claim against MPA far earlier. For substitution to be allowed would cause manifest prejudice and unfairness to MPA, which had prepared for the Preliminary Issues on the basis that, if successful, that would conclude the litigation. The cost and delay engendered by the Preliminary Issues would have been entirely pointless if the substitution application were allowed (at [27] – [31]).
The PI Judgment is available here.
The Substitution Judgment is available here.
Will Cook appeared (as sole Counsel, against a KC and junior) for MPA throughout the proceedings, instructed by Giles Tagg and Alessandro Morgan-Gianni of DAC Beachcroft LLP.
[1] The “Client” referred to Kazu 1.
[2] The “Consultant” referred to MPA.
