Candey Ltd v Basem Bosheh
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Arnold,Lord Justice Phillips |
| Judgment Date | 01 August 2022 |
| Neutral Citation | [2022] EWCA Civ 1103 |
| Docket Number | Case No: CA-2022-000280 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 1103
Lord Justice Coulson
Lord Justice Arnold
and
Lord Justice Phillips
Case No: CA-2022-000280
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Ms Clare Ambrose (sitting as a High Court judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
George Bompas QC and Mathew Rogers (instructed by CANDEY LIMITED) for the Appellant
Hannah Ilett (instructed by B A International Sols Ltd) for the Respondents
Hearing Date: 12 July 2022
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email and released to the National Archives. The date and time for hand-down is deemed to be 2pm on 1 August 2022
INTRODUCTION
Can a firm of solicitors bring proceedings against their former client on the basis that the client was in breach of a duty of good faith, by settling the underlying litigation on terms which meant that the solicitors had no express entitlement to their costs? To what extent, if at all, when bringing such a claim, can the solicitors rely on privileged documents? To what extent, if at all, can the solicitors rely on confidential documents, provided to them after the underlying proceedings have settled? These are just some of the questions raised by the claim and the appeal in these proceedings. When granting permission to appeal, Lord Justice Males referred to them as “novel issues”: in my view, that was something of an understatement.
The appellant (“Candey”) commenced proceedings against the respondents (“Mr Bosheh and Mr Salfiti”) for £3 million. That claim arose out of the contract, agreed between Candey on the one hand, and Mr Bosheh and his son Sulaiman (“the Boshehs”) on the other, by which Candey acted for the Boshehs in connection with civil proceedings in London brought against them by Sheikh Mohamed (“the Retainer”). Candey's claim is put by way of fraudulent misrepresentation, deceit and breach of an implied obligation of good faith. Candey allege that, by settling Sheikh Mohamed's claim on a ‘drop hands’ basis, the Boshehs were acting in breach of that duty and in repudiatory breach of the Retainer. Candey's claim against Mr Salfiti was that he procured the Boshehs' breach of the Retainer and/or was liable in unlawful conspiracy. The claims relied heavily on both privileged and confidential material.
At a two-day hearing in November 2021, Ms Clare Ambrose, sitting as a deputy High Court judge (“the judge”) dealt with a number of applications by both sides. Those included Candey's applications for a freezing injunction, and for permission to amend its particulars of claim to rely on privileged and confidential documents. Mr Bosheh and Mr Salfiti applied for an order striking out the claim in whole or in part; relief in respect of both privileged and confidential information; and an order that the hearing be heard in private. That latter application was refused at the start of the proceedings. The judge said that, in order to preserve the status quo, she would direct that any reference to a document is not to be treated as the document having been deployed or used in open court. We were content to adopt the same formula in respect of this appeal.
In a detailed judgment ( [2021] EWHC 3409 (Comm)), the judge ruled, amongst other things, that Candey could not rely on either the privileged nor some of the confidential material that they sought to deploy. She held that the claim based on the alleged implied terms, including that of good faith, had no prospect of success. She made similar findings in respect of the claims in deceit and fraudulent misrepresentation, conspiracy and inducing breach of contract. She found that the only claim made by Candey which had a real prospect of success was the alleged breach of an express term of the Retainer (known as “the Costs Term”). I make clear at the outset that nothing that I say in this judgment is intended to impact in any way on that ongoing claim. Candey's applications for permission to amend their pleadings and for a freezing order were both refused.
Candey originally sought and obtained permission to appeal against the judge's judgment on nine grounds. However, they have since abandoned four of those grounds: Grounds 4, 6, 8 and 9. That left Ground 1, which is concerned with the judge's refusal to allow Candey to rely on privileged material. It was agreed that, if this court refused the appeal on Ground 1, then it would inevitably mean that the appeal on Ground 5 (express representations) and Ground 7 (unlawful means conspiracy and procuring breach of contract) would also fall away. The other remaining Grounds are Ground 2 (an appeal against the judge's order that Candey could not use confidential material), and Ground 3, which went to the judge's rejection of the implied term of good faith, a central plank of the claim against Mr Bosheh and Mr Salfiti.
Mr Bosheh and Mr Salfiti served a Respondent's Notice. This raised a number of issues not directly covered by the Grounds of Appeal. The most important is at paragraph 4 of the Respondents' Notice, which alleges that the entire basis of the claim is flawed, and has no reasonable prospect of success, on the ground that, even allowing for the good faith term, the Boshehs were not and could not have been in breach of contract in instructing Candey to agree a settlement on a ‘drop hands’ basis. This reflects their original application before the judge to strike out the claim altogether, or for reverse summary judgment.
The appeal was heard on 12 July 2022. Despite the fact that there were four lever arch files of authorities (the vast majority of which were never referred to) the issues on appeal were relatively straightforward. I am grateful to Mr Bompas and Ms Ilett for the crispness of their submissions.
THE FACTUAL BACKGROUND
In 2018, Sheikh Mohamed commenced proceedings against Mr Bosheh and Mr Salfiti. The proceedings alleged fraud, knowing receipt and conspiracy. An important aspect of those proceedings was that certain Yahoo and RBS accounts in Mr Bosheh's name were secretly controlled by Mr Salfiti, who had used them to induce Sheikh Mohamed into entering into certain high interest loans.
By an email dated 20 September 2018, Candey agreed to act on a conditional fee basis for both men in connection with the proceedings brought by the Sheikh. However, owing to a potential conflict of interest, they stopped acting for Mr Salfiti, who found alternative representation. In January 2019, Sheikh Mohamed discontinued those proceedings and immediately commenced new proceedings, adding additional defendants, including Mr Bosheh's son, Sulaiman. The basic allegations remained the same. They were denied and Mr Bosheh also brought a substantial counterclaim.
For the new proceedings, the terms of Candey's Retainer were subsequently varied, first to a damages-based agreement and then, on 11 January 2021, to a different conditional fee agreement, having retrospective effect (“the CFA”).
Relevant parts of the CFA included the following:
“In the event you win or are successful i.e. you recover any damages, profits, money, and/or you derive any other benefits (“the Proceeds”) or an award of assessed, contractually indemnified or agreed costs from contemplated or actual proceedings against your Opponent through formal legal proceedings (whether by court order, tribunal award, settlement, agreement or otherwise) you agree that you will pay CANDEY double our standard hourly rate costs (“the Double Fee Payment”) incurred and to be incurred in respect of the Proceedings. If you lose, you will not be liable to pay CANDEY anything. The Double Fee Payment is made up of the above hourly rates (“Standard Hourly Rates”) as well as a 100% success fee (the “Success Fee”). If you are successful in Court proceedings, the Court will normally order your Opponent to make a substantial contribution to your costs incurred at standard hourly rates. The Success Fee element may be recoverable from your Opponent in Court proceedings pursuant to the contractual indemnity.
If (at any time) we obtain an order or agreement that our hourly rate costs (with or without the uplift) be paid by your Opponent then we shall be entitled to recover those costs from your Opponent, and you are always liable to pay these costs to us to the extent that we recover them from your Opponent. You will always seek to recover costs by order or agreement.” (Emphasis added)
The last sentence was referred to by the judge as “the Costs Term”. It was Candey's alternative claim, made pursuant to that provision, which was the only claim that the judge allowed to go on to trial.
It was common ground before the judge, and also before this court, that the terms of the CFA meant that, if the Boshehs recovered nothing out of the litigation, Candey would not be entitled to anything by way of their costs. It was also agreed that, for these purposes, a settlement on a ‘drop hands’ basis — with neither side recovering money from the other, and each side being responsible for its own costs – was a nil recovery and therefore meant that Candey would recover nothing from the Boshehs as a contribution towards the costs that they had incurred in acting pursuant to the CFA.
During the Sheikh Mohamed litigation, in around June 2021, Mr Candey obtained a proposal from Sheikh Mohamed: that his claim against the Boshehs would be discontinued; 50% of any recovery that Sheikh Mohamed made against Mr Salfiti, up to a cap of £1 million, would be paid to the Boshehs; and the Boshehs would agree not to give evidence. Mr Candey explained to the Boshehs that any money paid out pursuant to this...
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