BPC Hotels Ltd and Others v Wright Hassall LLP and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Soole |
| Judgment Date | 06 June 2016 |
| Neutral Citation | [2016] EWHC 1286 (QB) |
| Court | Queen's Bench Division |
| Date | 06 June 2016 |
| Docket Number | Case No: HT2016-000032 |
[2016] EWHC 1286 (QB) (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Soole
Case No: HT2016-000032
Simon Howarth (instructed by Shakespeare Martineau LLP) for the Claimant
Ben Quiney QC (instructed by BLM) for the First Defendant
Andrew Onslow QC and Hannah Glover (instructed by Mills & Reeve LLP) for the Second Defendant
Hearing dates: 3–4 May 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
These are the applications of the First Defendant solicitors ('WH') and the Second Defendant barrister ('MM') for summary judgment on the Claimants' claims of professional negligence against them, pursuant to CPR 24.2 and/or 3.4. The claims concern advice which they gave in 2009 in respect of a claim of professional negligence against the Claimants' previous solicitors Brooke North/Brooke North LLP ('BN') for advice given in 2003.
Evidence having been adduced by the parties, I consider these applications to fall under CPR 24.2 rather than 3.4. The parties remind me of the summary of principles for such applications by Lewison J in Easyair Ltd v. Opal Telecom Ltd [2009] EWHC 339 (Ch) as approved by the Court of Appeal in AC Ward & Son v. Catlin (Five) Ltd [2009] EWCA Civ 1098. I will not set those out again but particularly bear in mind the imperatives that the applications should not turn into a mini-trial and that account is to be taken not only of the evidence in these applications but of any evidence that can reasonably be expected to be available at trial.
Narrative
It is necessary to set out the story in some detail. What follows is taken from the material put before me by the parties and is not in dispute for the purpose of these applications.
The First Claimant ('BPC') is a company owned by the Second and Third Claimants (respectively 'Mr C' and 'Mrs C).
During the 1990s Mr and Mrs C built up and sold a chain of nursing homes. They invested the substantial profits in a hotel business for which BPC was their corporate vehicle.
In 1998 BPC bought Princess Court, a Victorian office building in Manchester, with a plan to convert it into a four-star hotel ('the Hotel'). Costain was appointed main contractor. The finance was to be provided by the bank RBS.
A further finance agreement dated 20.9.00 RBS agreed to lend BPC £10.65m for this purpose. Costain started work on 2.10.00. The formal Main Contract ('MC') between BPC and Costain was entered on 30.4.01. It contained the usual provisions for termination in the event of default by either party.
As a condition to drawdown, BPC on 23.7.01 granted RBS a debenture creating fixed and floating charges over its business and assets, with the usual power to appoint administrative receivers ('Receivers') and a first legal charge over the property. This power had a particular significance because of the agreement which BPC had entered for the Hotel to operate as a Holiday Inn franchise, which included a provision that the franchise would be lost if BPC entered receivership. In consequence the value of the completed Hotel would be diminished. Furthermore the effect of insolvency on the MC was to render the time for completion of the development 'at large', so that BPC would lose the right to deduct liquidated damages for delay.
By a further condition, a Deed of Warranty ('the Deed') was executed on 18.7.01 by Costain, BPC and RBS. On 12.7.01 RBS provided overdraft facilities limited to £300,000 and repayable on demand.
By clause 8.1 of the Deed Costain undertook to give RBS not less than 21 days notice of its intention to terminate the MC. Service of such a notice then triggered the 'step-in' provision of clause 9, unless the MC was not determined for any reason (clause 8.3), e.g. if RBS provided further funding.
Clause 9 provided (subject to clause 8.3) that, within the period of Costain's notice, RBS should give notice to Costain requiring it to continue its obligations under the MC and acknowledging that RBS was assuming all the existing and future obligations of BPC thereunder. The MC would then be deemed to continue in full force and effect as if it had been made between RBS and Costain. It is now common ground that, if triggered, this 'step-in provision' was mandatory.
By clauses 10 and 11 of the Deed there was a distinct step-in provision. In the event of BPC being in default of the finance agreement, RBS could give notice to Costain that it proposed to proceed with the development by itself or its nominee as Employer; for the contract to continue as if made between Costain and RBS/its nominee; and for RBS to be responsible for the existing and future obligations under the contract (and where a nominee was appointed, supported by guarantee).
On 30.10.01 BPC and RBS entered a second finance agreement for a loan of £700,000. As security for this loan Mr and Mrs C gave personal 'all monies'" guarantees limited to that sum and secured by a second charge on their matrimonial home.
By early 2003 the project was experiencing difficulties. There were delays and cost overruns, for which each party blamed the other. BPC needed further funds to complete the development. A further instalment of c.£485,000 was due to Costain on 20.5.03, together with substantial sums to other parties performing services for the development.
On that day at 11.30 RBS (Mr Logan) telephoned Mr C to say that the payment would not be made unless by 2 pm he and Mrs C increased their personal guarantees to £1.65m. If not, there would a breach of the MC and RBS would appoint Receivers. As Mr and Mrs C drove to a meeting with RBS that morning they telephoned BN's Mr Lopeman for advice.
Having received copies of the proposed forms of guarantee Mr Lopeman gave advice to them (via their car speakerphone) as they drove. Following that advice Mr and Mrs C signed the guarantees (in fact limited to £1.15m), the further funds were advanced by RBS and Costain duly paid. Mr Lopeman's advice on that day is at the heart of the allegations of professional negligence against BN, albeit it is said that he gave negligent advice after that date.
On 23.6.03 Mr C telephoned WH (Mr Stockdale) and told him that he was under severe pressure from RBS. They wanted a meeting and suggested that BPC bring a legal representative. In this context, a further instalment of payments would be due to Costain in July.
On 25.6.03 the meeting took place and Mr Lopeman attended with Mr C By letter to BPC/Mr C on the following day Mr Lopeman recorded that RBS had stated that it would not undertake any further funding pending agreement of a fixed price and time deal with Costain and stressed that it was not prepared to fund the projection beyond practical completion. The letter concluded: 'The Bank also mentioned the importance of taking insolvency advice bearing in mind the potential insolvency of the company and your position as a director. In this respect, can you please contact my Partner, Stuart Frith, who will be able to assist.'
By 17.7.03 RBS appreciated that the clause 9 step-in provision in the Deed was mandatory; so that in the event of default by BPC Costain could oblige RBS to pay for the completion of the project. However BN had on 3.7.03, 7.7.03 and c.21.7.03 advised that the step-in provisions were optional at the election of RBS.
During August 2003 Mr C contacted solicitors Pannone LLP, who had a specialised construction department. Pannone agreed to act for BPC against Costain, provided that BPC appointed Construction Consultants to advise on Costain's EOT claims. Pannone recommended a consultancy firm but they were conflicted. The evidence does not show whether Pannone was ultimately retained.
By an internal 'outcome statement' dated 8.8.03 RBS noted that the Hotel was nearing completion. Current bank exposure was £12.2m; the anticipated total exposure might be as high as £17.8m. Costain's extension of time claims were estimated at £3.5m, subject to adjudication and to potential set off for liquidated damages claims by BPC. It was noted that the mandatory step-in provisions rendered RBS potentially responsible for all the liabilities under the MC; and that, were the step-in discretionary, RBS could avoid much of the disputed and contingent liabilities through an insolvency process. An analysis of the potential loss to RBS under various scenarios, including receivership, was attached.
On 19.8.03 an internal RBS e-mail (Macklin-Logan and others) stated that '…if we can get effective and full control then this has to be better than insolvency.' The identified means of obtaining control was by a bank-appointed director, which raised legal questions.
On 20.8.03 a response from Mr Logan recorded Mr C as having spoken to a potential bank-appointed director (David Evans) and said that, if he became a director, he would want an indemnity from him to the extent of his investment and guarantee, i.e. £6m. Mr Logan described this as 'clearly a non-starter' and said that Mr C was '…becoming increasingly aggressive and agitated'. He concluded that 'given the further breakdown in the relationship' the only way forward was the appointment of Receivers without delay.
On 28.8.03 RBS demanded repayment from BPC and appointed Receivers over its business and assets. BPC's total indebtedness was c.£12.3m.
On 29.9.03 Costain gave notice of its intention to terminate the MC and pointed to RBS' obligations under clause 9. RBS in fact...
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