Zvi Dekel v Re Capital Administrators Ltd & Anor

The Hon. Mr Justice Cawson: Contents Introduction 1 Background 7 The present claim 24 The Application 32 Principles to be applied in respect of summary judgment and strike out 35 The reflective loss issue 41 Introduction 41 The basis of the rule against reflective loss 43 The Defendants’ case 52 Mr Dekel’s case 54 Determination of the issue 64 Mr Dekel’s reliance on clause 20.1.2 of the Management Agreement 82 Introduction 82 Principles to be applied in respect of contractual interpretation 86 Mr Dekel’s case 89 The Defendants’ position 90 Determination 91 Whether RE Capital was ever bound by the Management Agreement 97 Overall result 106 Introduction

1. By their application dated 28 May 2025 (“ the Application ”), the Defendants, RE Capital Administrators Ltd (formerly Kaydan Accounting Ltd and GMG Real Estate Ltd) (“ GMG Real Estate ”) and RE Capital (Switzerland) SA (“ RE Capital ”) apply pursuant to CPR 3.4(2)(a) and (b) to strike out the present proceedings brought against them by the Claimant, Zvi Dekel (“ Mr Dekel ”), and/or pursuant to CPR Part 24 for summary judgment, alternatively for the proceedings to be stayed pending the determination of applications made within other related proceedings.

2. By the present proceedings, Mr Dekel, as a party claiming to be entitled to rely upon the provisions of s. 1(1) of the Contracts (Rights of Third Parties) Act 1999 (“ ”), claims damages for breach of contract by GMG Real Estate and RE Capital by the breach of provisions of a management agreement described as “Appointment for Project Management for a Project known as 18 Vine Street (formerly the Ragged School) together with 15-29 Eyre Street Hill London” dated 1 December 2017 and made between Clerkenwell Lifestyle Ltd, a company incorporated under the laws of the British Virgin Islands (“ the 1999 Act CLL BVI ”) (1) and GMG Real Estate (2) (“ the Management Agreement ”).

3. The basis of the application to strike out and/or for summary judgement is that: i) Clause 20.1.2 of the Management Agreement did not, as Mr Dekel contends, confer upon him a right pursuant to the 1999 Act to enforce any term of the Management Agreement; ii) In any event, as Mr Dekel is a shareholder in CLL BVI, the loss alleged by Mr Dekel said to give rise to his claim for damages is reflective of any loss suffered by CLL BVI. Consequently, in accordance with the principle established in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 20 , as recently approved by the majority in the Supreme Court in Marex Financial Ltd v Sevilleja [2021] AC 39 , Mr Dekel is barred from bringing the present claim; iii) In any event so far as RE Capital is concerned, it was not a party to the Management Agreement, and although there was an assignment of the benefit of the Management Agreement to RE Capital, it is the latter’s case that there was no assignment of the obligations thereunder. Consequently, neither CLL BVI, nor any party entitled to enforce the terms of the Management Agreement pursuant to clause 20.1 thereof and by operation of s. 1(1) of the 1999 Act , can pursue a claim for damages for breach of contract as against RE Capital, as opposed to GMG Real Estate.

4. The Application is supported by the witness statements dated 29 May 2025 and 19 September 2025 of Joseph Richard Payne, a partner in the Defendants’ Solicitors, Katten Muchin Rosenman UK LLP. The Application is opposed by the witness statement dated 18 July 2025 of Alexander Joseph Gerbi (“ Mr Gerbi ”), a partner in Mr Dekel’s Solicitors, Quinn Emanuel Urquhart & Sullivan UK LLP.

5. Mr Julian Greenhill KC and Mr James Goodwin appeared for the Defendants, and Mr Jonathan Seitler KC and Mr Ben Woolgar appeared for Mr Dekel. I am grateful to them for their helpful written and oral submissions.

6. For the reasons that I set out below, I consider that the proceedings should be struck out and/or that summary judgement should be granted in favour of the Defendants. Consequently, it is not necessary for me to consider the Defendants’ application for a stay. Background

7. CVL BVI was established as an investment vehicle for a project (“ the Project ”) in respect of a property at 18 Vine Street and 15-29 Eyre Street, Clerkenwell, London EC1R 5DZ (“ the Property ”), and involving a proposed comprehensive redevelopment thereof. For the purposes of the Project, the Property was owned by CLL BVI’s wholly-owned subsidiary, Clerkenwell Lifestyle (UK) Ltd (“ CLL UK ”), a company incorporated under the laws of England and Wales. It was CLL UK that was to carry out the development itself with funding provided, in a significant part, by CLL BVI using funds raised by the subscription of shares by Mr Dekel and others.

8. How the development by CLL UK was funded is set out in detail in paragraph 12 et seq of an affidavit made on 8 November 2025 by Mr Sean Gaskell (“ Mr Gaskell ”), a director of CLL UK and CLL BVI, on behalf of CLL BVI in proceedings brought by Mr Dekel in the BVI to which I will return. In summary, the position is that CLL BVI raised £21,077,660 from investors including Mr Dekel who acquired shares in CLL BVI. CLL BVI used £6,035,442 of the funds so raised to subscribe for 6,035,442 shares of £1 each in CLL UK. The balance of just over £15m was then lent by CLL BVI to CAF6 Luxembourg SA (“ CAF6 ”) at a rate of interest of 7% per annum. CAF6 then used these monies, together with other monies borrowed from mezzanine lenders, to make a loan of £27.25m to CLL UK.

9. As Mr Gaskell then describes in paragraph 14 of his affidavit, CAF6 subsequently advanced further funds to CLL UK. Further, as set out in paragraph 15 et seq of Mr Gaskell’s affidavit, CLL UK received a significant number of additional loans directly from other lenders.

10. By the Management Agreement, CLL BVI appointed GMG Real Estate to manage the Project, with the Management Agreement setting out CLL BVI’s requirements and GMG Real Estate’s responsibilities.

11. The following provisions of the Management Agreement are of particular importance for present purposes, namely: i) The definition of “Subsidiaries” in clause 2.1.25 included CLL UK. ii) Clause 4 thereof set out the obligations imposed on GMG Real Estate under the terms of the Management Agreement, including performing the Property Management services set out in Schedule 1 to the Management Agreement. By way of example of the obligations imposed by clause 4 of the Management Agreement, clause 4.1.2 provided that GMG Real Estate should perform the services that it was required to carry out diligently and with the care and skill reasonably to be expected of a suitably qualified and experienced manager undertaking similar duties in respect to properties similar in scale and character to the services for properties similar to the Property. iii) Clause 11.2 thereof provided that GMG Real Estate might not assign or transfer the Management Agreement or any of its rights or obligations under it without the express written prior consent of CLL BVI. iv) Clause 20 thereof provided as follows: “20 Rights of Third Parties 20.1 The Property Manager agrees that pursuant to the Contracts (Rights of Third Parties) Act 1999 : 20.1.1 The Subsidiaries and any Associated Entity shall be entitled to enforce for its benefit any of the provisions of this Agreement; and 20.1.2 any other party that has/will have an interest in and/or has acquired/will acquire an interest in and/or who has provided finance and/or refinance and/or will be providing finance and/or refinance in connection with the Property and/or any part or parts thereof comprising the Project or any part or parts thereof, the works comprising the Project and/or in each case any part or parts thereof shall be entitled to enforce for its benefit any of the provisions of this Agreement on issue to the Property Manager of a notice confirming the identity and interest of such third party.”

12. So far as Mr Dekel’s involvement is concerned, he was, as I have already touched upon, one of the investors who subscribed for shares in CLL BVI. He contributed £4m in exchange for 4m “Participating Shares” in CLL BVI. This £4m formed part of the £21,077,660 raised from investors referred to in paragraph 8 above that was then applied as referred to above by CLL BVI.

13. Prior to investing this £4m, Mr Dekel and the others to whom Participating Shares were allotted were provided, amongst other things, with a presentation prepared by GMG Real Estate, and an Investment Memorandum (“ the Investment Memorandum ”). Mr Dekel then entered into a Subscription Agreement on 24 November 2017 (“ the Subscription Agreement ”).

14. The Investment Memorandum stated that its purpose was to: “ … Provide information to identified private potential subscribers in order to assist such potential subscribers in the evaluation of the merits of their investment in the Company [i.e. in CLL BVI], which shall eventually use the aggregate Subscription Amount (as defined below) of up to GBP £27,250,000 … or such other amount (of a greater or lesser sum) as the director of the Company shall in its sole discretion determine for the purposes of the Objectives and inter-alia the purchase the Property and such other Property Projects as the director in its sole discretion may determine.”

15. The Investment Memorandum referred, amongst other things, to the following: “ Distribution Policy Unless otherwise used for working capital in connection with the Objectives, subject to applicable law and at the absolute discretion of the Director, any surplus of cash available for distribution will be distributed to the holders of Participating Shares. … Realisation Event The first to occur of: (i) the sale of the Property or any part thereof; or (ii) any other form of realisation and/or repayment of the aggregate Subscription Amounts; or (iii) the failure of a Participating Shareholder to pay any sum called in respect of the Participating Shares that have been issued with any amount of capital outstanding. Agreed Redemption of Shares Upon the occurrence of a Realisation Event or at any time thereafter (“Valuation Day”) the Director shall have the option exercisable as its sole discretion for an agreed redemption of the Participating Shares on their respective holders (“Agreed Redemption”) against the payment to each holder of Participating Shares of its pro-rata share of the net assets value of the Company after deduction of all liabilities including debts, payable dividends and fees and payments to the Property Manager on the Valuation Day as shall be determined by the Property Manager. The Agreed Redemption shall be effected by issuance of a notice of an agreed redemption on the respective holder of the Participating Share specifying the net assets value on the Valuation Day and the respective pro-rata portion of the specific holder. … The Proposal The Company will use substantially all of the proceeds, directly or indirectly through such other entities as may be determined by the Company in order to achieve the most efficient investment treatment for taxation and for the purpose of purchasing and funding the acquisition and development of the Property and completing the Objectives. The Company will thereafter raise such further finance (by borrowing or otherwise) upon such terms as the Director of the Company shall in its sole discretion determine in order to complete the Objectives. The Company may provide such security over the Property or other assets of the Company in order to secure such additional finance as may be required for the purposes of the Objectives. Additional finance may take prior security over the assets of the Company and its subsidiaries so that any investment or returns thereon may not be returned until such finance has been repaid.”

16. As to the Subscription Agreement: i) Recital (B) thereto recited that Mr Dekel wished to “subscribe for Participating Shares, of a par value of GB1.00 each, in consideration for payment of GBP 4 MILLION in the terms set out in the [Investment] Memorandum and subject to the provisions of the [Investment] Memorandum and the Incorporation Documents of the Company.” ii) By clause 1, Mr Dekel, in consideration of the issue of Participating Shares by CLL BVI to him, undertook, represented and warranted to CLL BVI as therein set out, including that: “1.10 [he] understands that [his] capital contribution cannot be withdrawn from the Company except by way of redemption of the Participating Shares upon the occurrence of a Realization Event in accordance with the terms outlined in the [Investment] Memorandum, that [his] investment may be invested in assets that are illiquid, and that [he] has no right to demand distribution from the Company prior to the Company’s termination other than by redemption of Shares …”

17. CLL BVI’s “Incorporation Documents” included its Memorandum and Articles of Association. So far as the latter are concerned, I note the following: i) Clause 5.1 thereof provided that CLL BVI was “… authorised to issue a maximum of 27,300,002 Shares of GBP1.00 par value each, comprising two classes of shares as follows: (a) 2 Management Shares; and (b) 27,300,000 Participating Shares. Each class of Shares has the rights and privileges outlined in Clause 6 …” ii) Clause 6 thereof provided as follows, under the heading “Rights of Shares”: 6.1 Each Shareholder shall be entitled to one vote on any resolution of Shareholders irrespective of the number or class of shares held. 6.2 Each Management Share in the Company shall also confer upon the Shareholder the right to an equal share in the distribution of the surplus assets of the Company, but no participation rights to share with Participating Shares in any dividend paid by the Company. 6.3 Each Participating Share in the Company shall also confer upon the Shareholder: (a) the right to an equal share in any dividend paid by the Company; and (b) the right to an equal share in the distribution of the surplus assets of the Company. 6.4 The Company may redeem Participating Shares without the consent of the holder in accordance with the terms of the Information Memorandum and Subscription Agreement.

18. Although Mr Dekel subscribed for 4m Participating Shares in CLL BVI, his shareholding was reduced in 2018 to 2,800,000 shares in circumstances that are somewhat controversial. A Business Plan Review 2024 prepared by RE Capital refers to an acquisition loan of £12m having been obtained shortly after acquisition, and to this assisting in “repaying the shareholders 30% of their investment (£6.3m), as well as reducing the mezzanine debt by c£2.9m.” In submissions, the Defendants referred to this as being a redemption of shares as anticipated by the Investment Memorandum, and as provided for by Clause 6.4 of CLL BVI’s Memorandum Articles of Association. On behalf of Mr Dekel, a rather different interpretation of events was suggested to which I shall return.

19. By a Deed of Assignment of Contract and Subcontract dated 28 May 2021 between (1) GMG Real Estate and (2) GMG Real Estate Holdings Ltd (“ GMG Holdings ”), GMG Real Estate purported to assign “all its rights, title, interest and benefit in and to the [the Management Agreement] to” GMG Holdings with effect from the date of that deed, and GMG Holdings agreed “to perform all of [GMG Real Estate’s] obligations under the [Management Agreement] from” the date of the deed.

20. By a further Deed of Assignment of Contract and Subcontract dated 28 May 2021, i.e. the same day, between (1) GMG Holdings and (2) RE Capital, GMG Holdings purported to assign “all its rights, title, interest and benefit in and to [the Management Agreement] to” RE Capital with effect from the date of that deed, and RE Capital agreed “to perform all of [GMG Holding’s] obligations under the [Management Agreement] from” the date of the deed.

21. CLL BVI’s Register of Members shows that, as at the date of the Management Agreement, the two “Management Shares” in CLL BVI were vested in GMG Real Estate. The Register of Members further shows that on 28 May 2021, the two Management Shares were transferred to GMG Holdings and then, the same day, by GMG Holdings to RE Capital.

22. There is an issue between the parties as to whether these latter events merely effected an assignment of the benefit of the Management Agreement to RE Capital, such that the obligations thereunder had simply been subcontracted to RE Capital without RE Capital being bound by any obligations to CLL BVI or to any other party entitled to enforce the Management Agreement, or whether, alternatively, these latter events effected a novation of the Management Agreement such that RE Capital became the relevant contracting party with CLL BVI under what would have been, technically, a new agreement upon the terms of the Management Agreement.

23. The Deeds of Assignment of Contract and Subcontract took place after 31 December 2020, when GMG Real Estate was acquired out of the GMG group of companies by Mr Newman Leech (“ Mr Leech ”), one of the founders of the GMG group, and an asset manager called Skybound Capital. GMG Real Estate became a subsidiary of RE Capital (of which Mr Leech was CEO), and RE Capital, by these deeds, replaced GMG Real Estate as “Property Manager” for the purposes of the Management Agreement. The present claim

24. Unfortunately, the Project has comprehensively failed, and Mr Dekel has lost his investment in CLL BVI, and any hope of making a return thereupon. It is his case that this has been caused by GMG Real Estate’s and RE Capital’s failure to perform the services required of them under the Management Agreement with the care and skill reasonably to be expected, in breach of the terms of the Management Agreement.

25. It is unnecessary for present purposes to go into the detail of the scope and extent of the breach alleged, but broadly speaking the gist of Mr Dekel’s complaints are to the effect that: i) A business plan produced by GMG Real Estate that contained assumptions which were flawed and/or unrealistic, including failing to anticipate any requirement for affordable housing, failing to include a deduction for the purchaser’s costs (such as SDLT, legal fees, etc.), including no contingency in the construction budget, and assuming an unrealistic development timetable. ii) GMG Real Estate and RE Capital thereafter took a number of decisions which caused delays to completion and increased costs, including (a) at an early stage, deciding to return the £6.3m to Participating Shareholders which, so it is alleged, left the Project over-leveraged; and (b) significant delay in the start of construction because of that over-leveraging. iii) GMG Real Estate failed to address changes in the Project from to time, and in particular failed to explore exit alternatives once it became apparent that the Project would not be as profitable as anticipated. This is alleged to have included failing to consider pre-letting parts of the Property, “mothballing” the Project following the grant of planning permission, and/or selling the Property as a whole following the grant of planning permission. iv) As against RE Capital, which took over the role of GMG Real Estate as from 28 May 2021, it is alleged that given that the failures of the GMG Real Estate would have been readily apparent to RE Capital, it failed to take steps to mitigate the effects of those failures, particularly in addressing relevant exit options.

26. It is these complaints that form the basis of the present proceedings by which Mr Dekel pursues a claim for breach of contract as against GMG Real Estate and RE Capital pursuant to s. 1(1) of the 1999 Act , it being his case that he is entitled to enforce the terms of the Management Agreement against them relying upon the terms of clause 20.1.2 of the Management Agreement. In the case of RE Capital this is alleged on the basis that RE Capital became bound by the terms of the Management Agreement in May 2021 in the circumstances referred to above.

27. More specifically so far as clause 20.1.2 of the Management Agreement is concerned, although Mr Dekel had previously sought to rely upon other parts of clause 20.1.2, ultimately, he now solely alleges that he is a party who has “… provided finance and/or refinance … in connection with the Property” etc.

28. In paragraph 38 of his Particulars of Claim, Mr Dekel alleges that if GMG Real Estate and RE Capital had “acted in accordance with their duty of skill and care and not committed the breaches set out above, the Project would have been successfully delivered in such a manner as to ensure not only that all equity investors’ funds were preserved but that they received a return on their investments.”

29. Mr Dekel then goes on, in paragraph 39 of his Particulars of Claim, to allege that the breaches of duty set out in the Particulars of Claim: “… caused loss to Mr Dekel comprising the loss of the return of his investment that the Project would have made but for the negligence of GMG Real Estate and RE Capital.”

30. Mr Dekel has commenced three other sets of proceedings, as follows: i) “ The CLL BVI Proceedings ” – By a Fixed Date Claim Form dated 16 September 2024, Mr Dekel (as a shareholder in CLL BVI) applied to the High Court in the BVI for leave to bring a derivative claim in England in the name of CLL BVI, against seven defendants including RE Capital. On 4 March 2025, the application was dismissed by Mithani J. However, Mr Dekel applied for leave to appeal and to vary the relevant order. Leave to appeal was granted on 10 June 2025. Whilst this cannot be guaranteed, it is understood that the appeal may be heard in either the February or June 2026 sitting of the Court of Appeal of the Eastern Caribbean. ii) “ The CLL UK Claim ” – On 19 September 2024, Mr Dekel applied to this Court for leave to bring a double derivative claim in the name of CLL UK against five defendants including RE Capital. On 15 May 2025, Fancourt J determined that there is a prima facie case for the derivative claim to continue and ordered the application to be listed for a hearing inter partes. Two of the defendants to these proceedings, including Mr Leech, have applied for a stay to enable it to be heard with the CLL BVI claim if leave is granted for the latter to be pursued on appeal. Subject thereto, the inter partes permission hearing is estimated to require up to 6 days of hearing time and is unlikely therefore to be dealt with particularly speedily. iii) “ CLL BVI Claim ” – On 22 April 2025, Mr Dekel issued a claim form in this Court for a derivative claim in the name of CLL BVI, purportedly in order to protect his position for limitation purposes pending determination of the CLL BVI Proceedings. Mr Dekel applied for, and on 28 July 2025, this Court granted a stay of the CLL BVI Claim pending determination of the appeal in the CLL BVI Proceedings.

31. These proceedings, whilst including RE Capital as a defendant, do not include GMG Real Estate. It has been explained on behalf Mr Dekel that he only became aware of the existence of the Management Agreement more recently. This may provide an explanation as to why the breach of contract claims being pursued by way of the present proceedings do not feature in the earlier other claims. The Application

32. The present claim having been issued on 21 March 2025, and having been served together with Particulars of Claim, the Defendants issued the present application on 29 May 2025.

33. As I have touched upon, strike out and/or summary judgement is sought on three bases, namely: i) As a matter of true construction of clause 20.1.2 of the Management Agreement, no entitlement pursuant to s 1(1) of the 1999 Act to enforce the terms of the Management Agreement arose, because Mr Dekel did not, by expending £4m in subscribing for shares in CLL BVI, “provide finance or refinance in connection with the Property”; ii) In any event, the bar on a shareholder seeking to recover loss reflective of the same loss as that suffered by the company in which he is a shareholder applies in the present case, the fact that the loss claimed is reflective loss being said to be demonstrated by the way that the claim for damages is formulated in the Particulars of Claim. iii) In any event in the case of RE Capital, the latter never became bound by the terms of the Management Agreement because, in short, the Deeds of Assignment of Contract and Subcontract dated 28 May 2021 effected an assignment of the benefit of the Management Agreement, but not of its burdens, whether by novation or otherwise.

34. These issues were argued in the above order. However, I find it convenient to deal with the reflective loss issue first on the assumption that Mr Dekel is correct regarding the true construction of clause 20.1.2 of the Management Agreement. However, it is first necessary to consider the principles to be applied in an application to strike out, and for summary judgement. Principles to be applied in respect of summary judgment and strike out

35. I do not understand the principles to be applied in determining the Application to be in dispute.

36. So far as an application for summary judgment pursuant to CPR Part 24 is concerned: i) The question is whether the respondent to the application can show that they have a “real prospect” of succeeding on the relevant claim or issue, or of successfully defending the relevant claim or issue, as appropriate, within the meaning of CPR 24.2. ii) What this means was helpfully explained by Lewison J (as he then was) in his oft approved and applied passage in Easyair Ltd (ta Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15], as approved by the Court of Appeal in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 and as referred to in The White Book, 2025 at 24.2.3. In short: a) The court must consider whether the respondent to the application has a “realistic” as opposed to a “fanciful” prospect of success. b) The question boils down to whether the claim carries some degree of conviction, is more than merely arguable and has reality to it. c) The Court should not conduct a “mini trial” in reaching its decision, although that does not mean that it is bound to accept everything that a party says if factual assertions lack reality, particularly if contradicted by contemporaneous documents. d) Although micawberism will not assist a party seeking to rely on something that might turn up at trial, the Court should take account of evidence that can reasonably be expected to be available at trial. Thus if reasonable grounds exist for believing a fuller investigation into the facts would add to or alter the evidence available to a trial judge, or if a factual dispute is unlikely to be able to be resolved without reference to further (and especially oral) evidence, then a case should be permitted to proceed to trial – see Three Rivers DC v Bank of England [2003] AC 1 , and Doncaster Pharmaceuticals v Bolton [2007] FSR 63 at [18]. e) On the other hand, if a case or issue can be disposed of on the basis of a short question of law or construction, and all the relevant materials are before the court to enable it to do so, then the Court should grasp the nettle and decide it.

37. Under CPR 3.4(2)(a), the Court may strike out a statement of case if it appears that it discloses: “no reasonable grounds for bringing or defending claim” . For this purpose, it is to be assumed, broadly speaking, that the relevant facts pleaded in the statement of case are true, the question being whether they disclose a sustainable case in law. A claim may thus be struck out as not being a valid claim as a matter of law – see e.g. Price Meats Ltd v Barclays Bank Plc [2000] 2 All E.R. (Comm) 346.

38. As submitted on behalf of the Defendants, a statement of case which discloses no reasonable grounds (under CPR 3.4(2)(a)) may also be an abuse of the court’s process (under CPR 3.4(2)(b)), and the other party may also be entitled to summary judgment under CPR Part 24 – see The White Book, 2025 at 3.4.2. As there pointed out, there is no exact dividing line between ground (a) and ground (b), or between either of them and CPR Part 24. Thus, it may be appropriate to combine a strike out application with an application for summary judgment – see The White Book, 2025 at 3.4.21.

39. A significant difference is that CPR Part 24 allows the summary disposal of issues including preliminary issues by reference to evidence, in the circumstances referred to in paragraph 36(e) above, provided that the court has before it all the evidence necessary for the proper determination of the question and the parties have had an adequate opportunity to address it in argument – see Easyair (supra) at 15(vii), per Lewison J. As Lewison J went on to say: “The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 .”

40. On the other hand, if there are reasonable ground to believe that something may emerge on disclosure or otherwise as part of the litigation process that might throw a different light on matters, then summary judgment is unlikely to be appropriate – see, e.g. Okpabi v Royal Dutch Shell Plc [2021] UKSC 3 , at [128], per Lord Hamblen JSC. The reflective loss issue Introduction

41. The Defendants’ case is that this is a paradigm example of where the rule against the recovery of reflective loss must apply with the consequence that a shareholder, such as Mr Dekel, cannot recover the damages of the kind that he seeks to recover by way of the present proceedings because the loss that he seeks to recover damages in respect of is reflective of the loss suffered by CLL BVI if, contrary to the Defendants’ primary case, a claim for breach of the Management Agreement exists.

42. Before considering the basis upon which the rule is said to apply in the circumstances of the present case, and the reasons advanced on behalf of Mr Dekel as to why it is said to have no application in the circumstances of the present case, it is necessary to consider the basis for the rule itself. The basis of the rule against reflective loss

43. A leading authority is the decision of the Supreme Court in Marex Financial Ltd v Sevilleja [2020] UKSC 31 , [2021] AC 39 , where the majority (Lord Reed PSC (with whom Lady Black and Lord Lloyd-Jones JJSC agreed) and Lord Hodge DPSC), approved the application of the rule so far as a claim for reflective loss by a shareholder is concerned, whilst disapproving the extension of the rule to other categories of claimant such as the claimant in that case, a creditor of the company who had brought a claim in that capacity, and thus reversing the decision of the Court of Appeal.

44. As identified by Lord Reed PSC at [24], the issue as to the recovery of reflective loss by a shareholder first arose in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 20 4. At [39] in Marex , Lord Reed PSC summarised what Prudential had decided, as follows: “ … a diminution in the value of a shareholding or in distributions to shareholders, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, is not in the eyes of the law damage which is separate and distinct from the damage suffered by the company, and is therefore not recoverable. Where there is no recoverable loss, it follows that the shareholder cannot bring a claim, whether or not the company’s cause of action is pursued. The decision had no application to losses suffered by a shareholder which were distinct from the company’s loss or to situations where the company had no cause of action.”

45. At [27], Lord Reed PSC referred to the Court of Appeal in P rudential having explained its reasoning as follows at p. 223: "The shareholder does not suffer any personal loss. His only ‘loss' is through the company, in the diminution in the value of the net assets of the company . . . The plaintiff's shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property.''

46. At [28], Lord Reed PSC explained that this means that where a company suffers actionable loss, and that loss results in a fall in the value of its shares (or in its distributions), the fall in share value (or in distributions) is not a loss which the law recognises as being separate and distinct from the loss sustained by the company. Consequently, it does not give rise to an independent claim to damages on the part of shareholders.

47. At [31], Lord Reed PSC considered the nature of a share, and the attributes that rendered it valuable. As he identified, a share is not a proportional part of the company’s assets, and nor does it confer in the shareholder any legal or equitable interest in the company’s assets. As was made clear in Prudential , a share is a right of participation in the company in the terms of the articles of association, which normally confer, amongst other things, a right to participate in the distributions which the company makes out of its profits, and a right to share in its surplus assets in the event of a winding up.

48. At [37], Lord Reed PSC observed that, as the Court of Appeal had identified in Prudential, to allow a shareholder to pursue, in addition to the ability of the company to sue, a personal action would subvert the rule in Foss v Harbottle (1843) 2 Hare 461. He identified that the Court of Appeal had said in Prudential at p. 224 that the effect of the rule in Foss v Harbottle was that: “[the shareholder] accepts the fact that the value of his investment follows the fortunes of the company.” Further, Lord Reed PSC referred to the practical difficulties that might result from the subversion of the rule in Foss v Harbottle where, for example, the company’s management wanted to compromise the company’s claim but were prevented from doing so by the shareholder’s refusal to enter into a settlement with the wrongdoer.

49. Having gone on to explain why the courts had taken a wrong turn by extending the rule against reflective loss to others than shareholders, Lord Reed PSC returned, at [79] et seq, to provide a summary as to where the rule did and did not apply. At [79], he said this: “Summarising the discussion to this point, it is necessary to distinguish between (1) cases where claims are brought by a shareholder in respect of loss which he has suffered in that capacity, in the form of a diminution in share value or in distributions, which is the consequence of loss sustained by the company, in respect of which the company has a cause of action against the same wrongdoer, and (2) cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss.”

50. Lord Reed PSC then explained at [83] that the critical point in respect of the first category of cases was that the shareholder had not suffered a loss which was regarded by the law as being separate and distinct from the company’s loss, and therefore they had no claim to recover it. He then observed that a shareholder (unlike a creditor or an employee) did, however, have a variety of other rights which may be relevant in a context of this kind, including the right to bring a derivative claim to enforce the company’s rights if the relevant conditions were met, and the right to seek relief in respect of unfairly prejudicial conduct of the company’s affairs.

51. Lord Hodge DPSC, in a separate judgement, agreed with Lord Reed PSC. I note that at [98], Lord Hodge DPSC said, agreeing with Lord Reed JSC, that the rule against the recovery of reflective loss: “… relates only to the diminution in value of shares or in distributions which the shareholder suffers in his capacity as a shareholder as a result of the company having itself suffered actual damage. Where the shareholder pursues a personal claim against a wrongdoer in another capacity, such as guarantor or creditor of the company, the exclusion has no application.” The Defendants’ case

52. The Defendants argue that the present case falls fairly and squarely within the first category of case identified by Lord Reed PSC, and that the claim for damages as formulated in the Particulars of Claim seeks, effectively, to put Mr Dekel in the position that he would have been in as a shareholder in CLL BVI had the Defendants complied with their contractual obligations, if indeed they are in breach thereof. The Defendants rely upon the fact that the documentation clearly shows Mr Dekel as having subscribed for shares in CLL BVI and being entered in CLL BVL’s Register of Members as a member.

53. Further, the Defendants rely upon the Investment Memorandum having defined “The Investment” as being investment in the shaRE Capital of CLL BVI. Further, reliance is placed in the expressed purpose of the Investment Memorandum as having been to: “assist such potential subscribers in the evaluation of the merits of their investment in the Company ” [my emphasis]. In addition, reliance is placed on the fact that the Investment Memorandum, by reference to the terms of which Mr Dekel subscribed for shares by the Subscription Agreement, set out procedures for making distributions and redeeming shares which clearly tied the fortunes of Mr Dekel’s investment in CLL BVI to the fortunes of CLL BVI itself, hence the submission that this is a paradigm case of reflective loss impermissibly being sought to be recovered by a shareholder. Mr Dekel’s case

54. In response to these submissions, it is submitted on behalf of Mr Dekel that the rule against the recovery of reflective loss does not apply in the circumstances of the present case because: i) Firstly, it is submitted that Mr Dekel’s claims do not arise qua shareholder of CLL BVI, but rather that Mr Dekel is to be treated as having been an investor in the nature of a creditor, with his shareholding being incidental thereto and merely providing security, with the result that his claim falls within the second of the categories identified by Lord Reid PSC in Marex at [79] and [83]; ii) It is submitted that the effect of s. 1 of the 1999 Act is to have conferred upon Mr Dekel a separate and distinct cause of action to that of CLL BVI to enforce the terms of the Management Agreement, with particular reliance being placed upon s. 1(5) of the 1999 Act .

55. As to the first of these arguments, it was submitted that Mr Dekel is properly to be treated as a creditor expecting the return of his capital, and that that is how the loss that he is seeking to recover ought to be viewed. Reliance was placed upon the way that matters were expressed in a number of the documents produced and provided to Mr Dekel prior to making his investment, including, for example: i) A presentation document in respect of the Project produced by GMG Real Estate in 2017 that referred to a “return on equity”, and “Equity invested” of £23m; ii) The way that “Funding Assumptions” were expressed in a Financial Model and Business Plan compiled by GMG Real Estate in September 2017, where reference was made to an initial capital requirement for the Project of £34m, to be comprised of £23m “equity” plus £11m of mezzanine lending that would rank ahead of “Equity”. iii) The reference in the latter document to an “equity release” of c £5.6m.

56. Reliance was also placed by Mr Dekel upon the Business Plan Review dated May 2024 prepared by RE Capital referred to in paragraph 18 above, and to an acquisition loan of £12m having been obtained to assist in “repaying” the shareholders 30% of their equity. This relates to the monies that were returned to shareholders such as Mr Dekel. It was submitted that this was paid out as a “capital distribution” and reflected a partial repayment to Mr Dekel as a creditor, rather than anything else.

57. It was submitted on behalf of Mr Dekel that what he has lost was “his capital and his return” which was not loss suffered qua shareholder, but as an investor in CLL BVI. It is submitted that this was not the same loss as any loss suffered by CLL BVI in respect of any breach of the Management Agreement.

58. So far as the effect of s. 1 of the 1999 Act on the rule against reflective loss is concerned, although accepted not to be directly relevant, reliance was placed by Mr Dekel on the decision of the Court of Appeal in Broadcasting Group Limited v Smith [2021] EWCA Civ 912 , [2022] 1 WLR 1 . In this case, the promisee under the relevant contract was the shareholder, and it was the company that was entitled to enforce the terms of the relevant contract pursuant to s. 1 of the 1999 Act . The question arose as to whether the promisee’s claim as the actual contracting party was defeated on the basis that its loss was reflective of the loss suffered by the company entitled to sue as third party pursuant to s. 1 of the 1999 Act . The Court of Appeal held that whilst the rule against the recovery of reflective loss prima facie applied, the effect of s. 4 of the 1999 Act was to prevent the rule applying in the way that it would otherwise have applied.

59. S. 4 of the 1999 Act , headed “Enforcement of a contract by promisee” provides as follows: “ Section 1 does not affect any right of the promisee to enforce any term of the contract.”

60. The Court of Appeal held that, on true construction of s. 4 of the 1999 Act , any right to enforce a contract which a third party acquired by virtue of s. 1 was additional to and could not “affect”, whether by destroying, extinguishing or otherwise, any pre-existing right of a contractual promisee to enforce any term of the contract. Consequently, if s. 1 were to be the proximate cause of a contractual promisee’s rights being extinguished, then s. 4 would operate to prevent such an outcome. The critical question was therefore whether it was the rule against the recovery of reflective loss or s. 1 that was the proximate cause of the claimant’s right to enforce the agreement being extinguished. It was held that s. 1 was the proximate cause, and therefore s. 4 operated so as to prevent that event occurring by virtue of the application of the rule against reflective loss.

61. As I have said, it was not suggested on behalf of Mr Dekel that this case applied to the present facts, where it is the company that is the promisee, and the shareholder whose right to sue arises, if it does, by virtue of s. 1 . However, it was submitted that the rationale for preserving the right to sue must be much the same, and that Parliament must have intended that a person entitled to rely upon s. 1 of the 1999 Act should have a right to enforce a promise made by third party irrespective of impediments such as the rule against reflective loss.

62. Reliance is placed by Mr Dekel on s. 1(5) of the 1999 Act , which provides: “(5) For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly).”

63. In short, it was submitted that s. 1(5) reinforces the point that s. 1 of the 1999 Act conferred on Mr Dekel a statutory right to sue that cannot be taken away from him, and/or that he has the benefit of a separate and distinct right to sue other than as shareholder conferred by s. 1 of the 1999 Act that means that he falls within the second of the categories identified by Lord Reed PSC in Marex at [79] and [83]. Determination of the issue

64. I do not consider that it can properly be contended that, if Mr Dekel is entitled to rely upon s. 1 of the 1999 Act , and if the Defendants did act in breach of the Management Agreement, the loss alleged to have been suffered by Mr Dekel was suffered by him as a creditor rather than qua shareholder, or in any other capacity other than qua shareholder in respect of loss suffered qua shareholder.

65. Mr Dekel plainly subscribed for shares pursuant to the Subscription Agreement. This expressly provided, at clause 1.10 thereof, that Mr Dekel’s capital contribution could not be withdrawn from CLL BVI except by way of redemption of his Participating Shares upon the occurrence of a Realisation Event in accordance with the terms of the Investment Memorandum. The Investment Memorandum spoke in terms of an investment in CLL BVI itself by a subscription of shares rather than any other form of investment. Mr Dekel was subsequently registered in CLL BVI’s Register of Members as a member, and that is how his investment was recognised rather than in any other way.

66. CLL BVI’s Memorandum and Articles of Association expressly provided, by clause 6.3 thereof, that each Participating Share in CLL BVI should confer on the Shareholder, such as Mr Dekel, a right to an equal share in any dividend paid by CLL BVI, and the right to an equal share in the distribution of the surplus assets of CLL BVI. Whilst this was, pursuant to clause 6.4 of the Memorandum and Articles of Association, subject to CLL BVI’s right to redeem Participating Shares, this was, as provided for within the definition of “Agreed Redemption of Shares” in the Investment Memorandum, on the basis of a payment being made to each holder of Participating Shares of its pro rata share of the net assets of CLL BVI, subject to certain deductions.

67. Although there was some suggestion that Mr Dekel did not appreciate the nature of the investment that he was making (see paragraph 85(v) below), and may have considered that he was making some other form of investment, the relevant documentation is, I consider, clear as to the true nature of Mr Dekel’s investment in CLL BVI, and there is no suggestion that the relevant documentation was a sham.

68. As I have touched upon, a point was taken on behalf of Mr Dekel with regard to the return to shareholders referred to in paragraph 18 above, which was referred to in the Business Plan Review 2024 as involving “repaying shareholders 30% of their investment (£6.3m)”. There may be a question mark as to whether CLL BVI was entitled to redeem ahead of a “Realisation Event”, but what occurred was, on any view, a reduction in the number of shares held by Mr Dekel in consideration of the payment of a sum of money to him. This does not, I consider, lead to the conclusion that Mr Dekel’s involvement with regard to the Project was anything other than as a shareholder in CLL BVI.

69. It is instructive to consider what would have occurred had the Project been successful. In those circumstances, CLL BVI would have been entitled to receive, if it did not do so, interest on the loan of just over £15m that it made to CAF6 (at a rate of 7% per annum), and would have been able to realise its own investment in the Project made through its shareholding in CLL UK. This would then have enabled CLL BVI to make a return to the holders of Participating Shares by way of dividend and/or distribution as envisaged by clause 6.3 of CLL BVI’s Memorandum and Articles of Association. Alternatively, if Participating Shares were redeemed, they would have had to have been redeemed for full value which would have reflected the successful investment in the Project through CLL UK.

70. The loss suffered by Mr Dekel if entitled to enforce the Management Agreement in his own right, and if the Defendants were in breach thereof, would therefore be the loss of the return that he would have received on the payment by CLL BVI of the dividends and distributions to holders of Participating Shares that would have been made had the Project been successful. If CLL BVI exercised the right to redeem shares, then Mr Dekel would have been entitled to the net value of shares, which would have been enhanced by the profit that CLL BVI its shareholding in CLL UK.

71. In these circumstances, I consider it to be clear that any loss suffered by Mr Dekel is genuinely reflective of the loss that any loss that CLL BVI might have suffered by reason of any breach by the Defendants the Management Agreement.

72. The loss specifically sought to be recovered by Mr Dekel as set out in paragraph 39 of the Particulars of Claim is expressed to be Mr Dekel’s loss of the return on his investment that the Project would have made but for the alleged negligence of the Defendants. However, on proper analysis, any such loss of the return of Mr Dekel’s investment is what he would have received as a shareholder in CLL BVI had the Project been successful, and that is a loss which is reflective of any loss suffered by CLL BVI itself.

73. Consequently, subject to the possible effect of the provisions of the 1999 Act , I am satisfied that the rule against reflective loss applies so as to bar a personal claim by Mr Dekel in respect of the loss that he seeks to recover by the present proceedings.

74. As to the provisions of the 1999 Act , I do not consider that they assist Mr Dekel in avoiding the rule against reflective loss.

75. Broadcasting Investment Group Ltd v Smith (supra) was concerned with the specific position of the promisee’s rights, and the preservation thereof by s. 4 of the 1999 Act . There is no equivalent position protecting the rights of a party entitled to enforce a contract by virtue of the provisions of s. 1 of the 1999 Act , rather than as actual promisee, in the same way. Further, I consider it instructive that in Broadcasting Investment Group Ltd v Smith , the Court of Appeal regarded the critical question is being whether it was the rule against reflective loss or s. 1 of the 1999 Act that was the proximate cause of the claimant’s right to enforce the agreement being extinguished. In the present case, any right to sue was conferred upon Mr Dekel by s. 1 of the 1999 Act . In these circumstances, it is difficult to see that the proximate cause of any loss of the right to enforce the Management Agreement was anything other than the rule against reflective loss.

76. I do not consider that the provisions of s. 1(5) of the 1999 Act assist Mr Dekel. This, as referred to above, provides that there is available to the third party any remedy that would have been available to them in an action for breach of contract had they been a party to the contract, i.e. it provides for a party relying upon s. 1 of the 1999 Act to be treated for the purposes of enforcement of the contract, in the same way as an actual party to the contract. However, had Mr Dekel been a party to the Management Agreement, then the same difficulty in respect of reflective loss would, I consider, still have arisen in that Mr Dekel would, in those circumstances, still have been seeking to recover a loss, as a shareholder, that was reflective of the loss suffered by CLL BVI, and not loss sustained in some other capacity such as creditor or employee.

77. In Broadcasting Investment Group Ltd v Smith (supra), it was argued that the primary obligations owed to a contractual promisee are different from the secondary entitlements granted by s. 1 of the 1999 Act , such that the shareholder was not binding its fortunes to those of the company in which it was a shareholder. The Court of Appeal did not consider it necessary to consider this argument in detail given its finding as to the effect of s. 4 of the 1999 Act . However, at [53], Asplin LJ did say that she found this argument to be … “a difficult one upon which to succeed given that the shareholder’s loss would be of the very nature described by Lord Reed PSC as falling within the rule in Prudential .”

78. This does, I consider, lend further support to the conclusion that I have reached.

79. I therefore consider that even if Mr Dekel is entitled to rely upon s. 1 of the 1999 Act as being a party falling within the scope of clause 20.1.2 of the Management Agreement, and even if the Defendants did act in breach of the Management Agreement, Mr Dekel is barred from claiming for any loss suffered in consequence thereof because such loss is reflective of the loss suffered by CLL BVI in respect of the breaches of the Management Agreement in question.

80. Consequently, I consider that Mr Dekel, being a shareholder in CLL BVI, is barred by the rule against reflective loss from pursuing a claim for breach of the Management Agreement against the Defendants. On this basis I consider that the Defendants are entitled to have the claim against them struck out, and/or so far as may be necessary and appropriate, to summary judgment.

81. As this disposes of the claim against the Defendants, it is not strictly necessary for me to consider the further issues that arise in respect of the Application. However, should I be wrong in my conclusion in respect of the reflective loss issue, I shall consider these further issues, but will do so in rather less detail than I otherwise would have done. Mr Dekel’s reliance on clause 20.1.2 of the Management Agreement Introduction

82. I do not understand it to be in dispute but that, subject to the issue of reflective loss, Mr Dekel is to be considered to have a real prospect of success in relation to a claim for damages for breach of contract if he can establish, for the purposes of clause 20.1.2 of the Management Agreement, that he is a “party … who has provided finance and/or refinance … in connection with the Property and/or any part or parts thereof comprising the Project, the works comprising the Project and/or in each case any part or parts thereof …” , or at least that he stands a real prospect of success at trial in demonstrating that he is such a party.

83. On behalf of Mr Dekel, it is submitted that the investment of £4m in CLL BVI amounted to him “providing finance” in connection with the Property/Project so as to qualify him for the purposes of clause 20.1.2 of the Management Agreement. On behalf of the Defendants, it is submitted that it is clear that, as a matter of true construction of clause 20.1.2, the reference to “finance” therein is a reference to direct finance provided for the Property/Project, rather than investment in a company (CLL BVI) that, itself, directly provided the relevant finance.

84. This raises a question of interpretation in respect of clause 20.1.2 of the Management Agreement.

85. It is the Defendants’ case that this is the type of short point of construction that it is appropriate to resolve in a summary judgement application on the basis that all the relevant evidence is before the court, and that there is only a speculative prospect of further evidence coming to light to shed a different light on matters. With what I detected to be some diffidence, it was submitted on behalf of Mr Dekel that the full relevant facts in relation to the background to the Management Agreement would only emerge at trial. Principles to be applied in respect of the contractual interpretation

86. The principles to be applied by the courts in the interpretation or construction of a contract have been definitively established by the trio of Supreme Court cases on the subject, namely Rainy Sky SA v Kookmin Bank [2011] UKSC 50 ; [2011] 1 WLR 2900 , Arnold v Britton and others [2015] UKSC 36 ; [2015] AC 1619 and Wood v Capita Insurance Services Ltd [2017] UKSC 24 ; [2017] AC 1173 .

87. By way of summary of the relevant principles, Mr Greenhill KC and Mr Goodwin rely upon the summary provided by Popplewell J (as he then was) in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The “Ocean Neptune”) [2018] EWHC 163 (Comm) , [2018] 1 Lloyd’s Rep. 654 at [8]: “The court’s task is to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement. The court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. The court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. Interpretation is a unitary exercise; in striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of drafting of the clause and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest; similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. It does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each”.

88. It was not suggested on behalf of Mr Dekel that this was anything other than an accurate summary of the relevant principles. Mr Dekel’s case

89. Mr Dekel’s case as to the proper interpretation of clause 20.1.2 of the Management Agreement is, in essence, as follows: i) The ordinary meaning of the expression “providing finance” is providing money, which Mr Dekel did in an amount of £4m which was then used by CLL BVI to fund the Project by subscribing for shares in CLL UK and lending just over £15m to CAF6 to lend on, with other monies, to CLL UK. Whilst Mr Dekel is not a lender, but rather is an investor, as such he provided finance that made a significant contribution towards the funding of the Project. A reasonable objective observer, it is submitted, would have regarded Mr Dekel as a person who had provided finance in connection with the Project. ii) Reliance is placed upon a definition of “finance” in the Oxford English Dictionary, namely: “Monetary resources; money used or intended for particular purpose; financing, funding.” This is said to amply describe the money that Mr Dekel provided for the Project through his investment in CLL BVI. iii) Further, Mr Dekel’s case is said to be supported by the contemporaneous documentation. Thus, for example, “The Objectives” as referred to in the Information Memorandum referred to the principal purpose of the fundraising exercise being carried out as being to “finance … And acquire the Property and to finance, hold, develop and manage, the Property …”. Further, “The Proposals”, as referred to in the Information Memorandum, made reference to raising “further finance”, suggesting it is said that what had been raised from shareholders such as Mr Dekel in respect of his £4m was regarded as being “finance” pointing, it is said, to what was meant by the same expression in clause 20.1.2 of the Management Agreement. iv) “Providing finance” includes, it is submitted, lending, but in ordinary parlance is not limited to lending. It is said that there are many ways in which finance might be provided, including investment by subscription of shares. v) Under clause 20.1.2 of the Management Agreement, the finance is to be provided “in connection with” the Property. The words “in connection with” are broad – see Celestial Aviation Services Ltd v UniCredit Bank AG [2025] 1 WLR 196 at [55] per Falk LJ. As Rix LJ said in Campbell v Conoco (UK) Ltd [2003] 1 All ER (Comm) 35 at [19], “the words ‘in connection with’ . . . are widely regarded as being as wide a connecting link as one can commonly come across”. vi) In paragraph 17 of his witness statement made on behalf of Mr Dekel, Mr Gerbi suggests that Mr Dekel’s sole interest was as a financier of the sort expressly permitted to enforce the Management Agreement. He further suggests that the shareholding that Mr Dekel acquired was incidental and the security for his investment, and that he gave no thought to becoming a shareholder as such. This is said to support the case that Mr Dekel was a provider of finance of the kind envisaged by clause 20.1.2. The Defendants’ position

90. The gist of the Defendants’ position is as follows: i) It is submitted that the concept of providing finance involves something more specific than the provision of money that enables another party to provide finance directly to the party requiring it and denotes the direct supply by the provider of the “finance” in question. It is said that the language in question, and the inclusion of the words “or refinance” in clause 20.1.2 points firmly to loan finance rather than to any other form funding. ii) It is therefore submitted that, as a matter of ordinary language, Mr Dekel has not provided finance in connection with the Property or the Project, but rather he has subscribed for shares in CLL BVI, and that it is CLL BVI that has procured the provision of finance in connection with the Property and the Project from CAF6, as well as providing direct funding by subscription for shares in CLL UK. iii) The Defendants, in turn, rely upon the wording of the Investment Agreement, and the fact that it made clear that the acquisition, holding, development and management of the Property would be structured “through such entities as the Board [of CLL BVI] shall in its sole discretion determine”, and identified CLL UK is a wholly-owned subsidiary that had been incorporated to acquire and own the Property (see the definition of “Objectives”). iv) To the extent that there is ambiguity in the language that is not otherwise resolved, then it is submitted that the court should prefer the construction which is consistent with business common sense and reject the other. As to this, it is submitted that the Defendants’ interpretation is consistent with business common sense, whereas Mr Dekel’s interpretation is not. This is on the basis that it is CLL BVI that is the party to the Management Agreement, and, apart from questions of reflective loss, all sorts of practical difficulties arise if the 18 participating shareholders in CLL BVI are, themselves, entitled to seek to enforce the Management Agreement. It is therefore submitted that, looking at matters objectively, it is inherently unlikely that the parties to the Management Agreement would have intended for the Project Manager to be exposed to a series of overlapping claims from individual shareholders. v) It is submitted that if the parties had intended to permit the enforcement of the terms of the Management Agreement by each and every one of the shareholders of CLL BVI, then it would have been very simple to have provided expressly for this in the language of clause 20.1.1, which did expressly provide for enforcement of the terms of the Management Agreement by “Subsidiaries” and “Associated Entities”. Determination

91. Even if Mr Gerbi’s hearsay suggestions regarding Mr Dekel’s state of mind are to be taken to be true, we are concerned with the intentions of the actual parties to the Management Agreement (GMG Real Estate and CLL BVI) objectively considered. Mr Dekel’s subjective considerations can do no more than provide background context. However, the difficulty is that matters were actually structured in terms of investors such as Mr Dekel subscribing for shares in CLL BVI by way of investment in that company so as to enable it to raise the funds to be used to finance the Property and the Project. As has been demonstrated in considering the reflective loss issue, what was envisaged was not that Mr Dekel would be repaid his money with some sort of return, but rather that, as the holder of “Participating Shares” in CLL BVI he would, if the Project was successful, receive dividends and distributions in that capacity by way of a return on his investment.

92. In this context, and considering the matter objectively, I consider it difficult to see that the parties to the Management Agreement can properly be considered to have intended that such holders of “Participating Shares” CLL BVI should be regarded as “providing finance” for the Property or Project within the meaning of clause 20.1.2 of the Management Agreement for, essentially, the reasons advanced by the Defendants.

93. To the extent that the relevant wording of clause 20.1.2 of the Management Agreement does admit of ambiguity, I am satisfied that the interpretation suggested by the Defendants more readily lends itself to commercial common sense, than that suggested by Mr Dekel. I see a real practical difficulty in a situation where the shareholders of the company that is the contractual promisee themselves have a personal right to sue upon the contract in question. As has been seen when considering the reflective loss issue, this is a practical consideration behind the rule in Foss v Harbottle – see Marex at [37].

94. I have considered whether there is anything further by way of factual background that might subsequently emerge to put a different complexion on matters at trial, but I am satisfied that this is unlikely.

95. I therefore conclude that, as a matter of proper interpretation thereof, clause 20.1.2 of the Management Agreement does not extend to apply to Mr Dekel on the basis that he is not a party that “provided finance” within the meaning of that clause. Consequently, I do not consider that it is open to Mr Dekel to rely upon s. 1 of the 1999 Act so as to enforce the terms of the Management Agreement in his own right.

96. Consequently, even apart from my decision in relation to the question of reflective loss, I am satisfied that the Defendants are entitled to summary judgement on the claim given my determination of the proper interpretation of clause 20.1.2 of the Management Agreement. Whether RE Capital was ever bound by the Management Agreement

97. The Defendants’ case is, quite simply, that RE Capital was never a party to the Management Agreement and therefore cannot be sued for breach of contract for any breach thereof.

98. It is the Defendants’ case that whilst the Deeds of Assignment of Contract and Subcontract referred to in paragraphs 19 and 20 above provided for the benefit of the Management Agreement to be assigned to RE Capital, and for RE Capital to step into GMG Real Estate’s shoes so far as concerned the Management Agreement as between the two of them, RE Capital never became bound as between itself and the counterparty to the Management Agreement, CLL BVI. This is said to be because this would have required a novation giving rise, technically, to a new contract between RE Capital and CLL BVI, which there never was.

99. I will deal with this issue in short terms, because I am satisfied that there is a real prospect of Mr Dekel, if I am wrong as to the issues of reflective loss and as to whether Mr Dekel can rely upon s. 1 of the 1999 Act so as to entitle him to personally enforce the terms of the Management Agreement by seeking damages for breach of contract, demonstrating at trial that there had, in fact, been a novation of the Management Agreement so as to bind RE Capital as against CLL BVI.

100. There are a number of considerations that lead me to this conclusion.

101. Firstly, clause 11.2 of the Management Agreement provided that GMG Real Estate could not assign or transfer any rights or obligations under the Management Agreement without the consent of CLL BVI. There is no evidence to suggest CLL BVI did not consent to GMG Real Estate’s entry into the Deeds of Assignment of Contract and Subcontract.

102. It is unclear why there was an assignment by GMG Real Estate to GMG Holding, and then an assignment by GMG Holdings to RE Capital on the same day, 28 May 2021. However, significantly, the assignment to RE Capital provided, as referred to in paragraph 20 above, that RE Capital, amongst other things, agree to perform all GMG Holdings’ “obligations” under the Management Agreement. However, prima facie, GMG Holdings can only have become subject to obligations under the Management Agreement if there had been a novation including CLL BVI. It might be said that the wording of the relevant document was in error, and/or that what the relevant deeds were concerned with was the performance of obligations under the Management Agreement as between the parties to the deeds, rather than accepting an obligation to CLL BVI. However, these are issues that cannot, I consider, be decided in the context of a summary judgement application such as the present.

103. Further, it is not without significance that, contemporaneously with the execution of these deeds, the relevant assignees respectively, GMG Holdings and RE Capital, became the holders of the Management Shares in CLL BVI and were entered in in the Register of Members of the latter as such. This does, I consider, lend support to there having been some form of tripartite arrangement that, objectively considered, gave rise to a novation binding CE Capital as against CLL BVI. Any novated contract would have been on the same terms as the Management Agreement and thus would have included clause 20.1.2.

104. A novation occurs where A and B agree that B shall take on the rights and obligations of A under a contract with C, consideration being provided by the discharge of the original contract. This is a matter to determined objectively and it does not matter if the parties are not aware that a novation has occurred. See Chitty on Contracts, 35th edition, at 23-089 et seq. Whilst a novation cannot take place without the consent of all parties, this may be inferred - Musst Holdings Ltd v Astra Management UK Ltd [2023] EWCA Civ 128 at [55] – [56].

105. Having regard to these considerations, I consider there to be at least real grounds for there having been a novation binding RE Capital to a novated Management Agreement. Overall Conclusion

106. For the reasons set out above, I have concluded that Mr Dekel has no right to claim for breach of the Management Agreement as a party falling within clause 20.1.2 thereof so as to entitle him to rely upon the provisions of s. 1 of the 1999 Act and that, in any event, even if he got over this hurdle, I consider that his claim would be barred by the application of the rule against the recovery of reflective loss.

107. In the circumstances, I consider that the Defendants are entitled to have the claim struck out and/or to summary judgement with the result that the claim is dismissed.