Commodities Research Unit International (Holdings) Ltd and Others v King & Wood Mallesons LLP (formerly known as SJ Berwin LLP)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Dingemans |
| Judgment Date | 05 April 2016 |
| Neutral Citation | [2016] EWHC 727 (QB) |
| Docket Number | Case No: HQ14X02754 |
| Court | Queen's Bench Division |
| Date | 05 April 2016 |
[2016] EWHC 727 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Dingemans
Case No: HQ14X02754
Nicholas Davidson QC and Michael Ryan (instructed by Fox) for the Claimants
Michael Pooles QC and Nigel Porter (instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 9 th, 10 th, 11 th, 12 th and 16 th February 2016
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.
Mr Justice Dingemans:
Introduction
This is a claim for professional negligence made by the Claimants, who are part of a group of companies known as the CRU Group ("the CRU Group"). The claim is made against a firm of solicitors King & Wood Mallesons LLP, who were formerly known as SJ Berwin LLP ("the solicitors"). The claim is in respect of advice given in 2007 and 2008 in relation to the termination of the employment of a former Chief Executive Officer ("the former CEO") of the CRU Group.
The employment of the former CEO was terminated by agreement dated 15 th August 2008 ("the employment termination agreement") about which advice had been given by the solicitors. In 2010 the former CEO brought proceedings in the Chancery Division ("the Chancery action") against the CRU Group in respect of his entitlement under a Long Term Incentive Plan ("LTIP") which had been agreed with him when he became CEO of CRU Strategies Limited ("Strategies") in 2004. The LTIP had been referred to in a side letter to the employment termination agreement.
The Chancery action was compromised by a payment by the CRU Group of £1,350,000 following a settlement agreement reached on 19 th October 2012 at a second mediation between the CRU Group and the former CEO ("the mediation settlement agreement").
In these proceedings the CRU Group claim against the solicitors the £1,350,000 paid to the former CEO, the costs incurred by the CRU Group in those proceedings (in the sum of £838,567.93 exclusive of VAT), and the costs of wasted management time in the sum of £71,000.
After the making of the mediation settlement agreement there was then a further dispute between the former CEO and the CRU Group about the terms of the mediation settlement agreement and whether tax of £673,177.16 should have been deducted by CRU Group when it paid the monies to the former CEO ("the tax action"). The tax action was determined by Vos J. on 10 th June 2013 in a judgment reported at [2013] EWHC 1633 (Ch). The former CEO's claim was dismissed. It is not suggested by the CRU Group in this action that the solicitors had any liability in respect of the tax action.
The issues and a pleading point
The issues between the parties have been refined in the course of the hearing, and I am very grateful to Mr Davidson QC and Mr Pooles QC and their respective legal teams for their assistance. The main issues between the parties are: the scope of the retainer of the solicitors by the CRU Group and whether advice about the LTIP was requested and given; whether there was a breach of duty on the part of the solicitors; whether there was any contributory negligence on the part of CRU Group; whether any breach of duty caused any loss to the CRU Group; and the quantum of any loss if loss was caused.
The main case advanced on behalf of the CRU Group was to the effect that: the solicitors were asked to and gave advice about the meaning of the LTIP clause at a meeting on 4 th September 2007; in order to give that advice the solicitors should have asked for further documents made at the time of the making of the LTIP; as a result of such advice emails exchanged in October 2004 relating to the LTIP would have been discovered ("the October 2004 emails"); on the discovery of the October 2004 emails both the CRU Group and the former CEO would have recognised that the former CEO had no entitlement under the LTIP; and as a result the Chancery action would not have been commenced and the CRU Group would not have had to pay monies to the former CEO, incur costs and waste management time.
In addition the CRU Group advanced a secondary case. This was to the effect that: the solicitors should have identified that there were general conditions of employment which were incorporated into the contract of employment; the general conditions contained a "payment in lieu of notice" ("PILON") clause; the existence of the PILON clause should have been discovered; if the PILON clause had been discovered the employment settlement agreement would have been concluded on terms more favourable to CRU Group.
A pleading point arose during the course of closing submissions. It was submitted by Mr Pooles on behalf of the solicitors that the secondary case had not been sufficiently pleaded in the Amended Particulars of Claim. Mr Davidson did not seek permission to re-amend, contending that the secondary case had been sufficiently pleaded.
My understanding had been, since reading the opening Skeleton Arguments, that there was a secondary case being advanced on behalf of the CRU Group. This part appears from paragraphs 66 and 67 of the Claimant's opening Skeleton Argument which included a submission that " whether the contract contained a PILON mattered". Expert evidence relating to whether a contract of employment concluded in 2004, about which advice was being given in 2007 and 2008 might expect to include a PILON clause was adduced. Evidence had been led and questions asked on the secondary case.
However the pleading point having been taken, it is necessary to determine it. In particular Mr Pooles submitted that although a breach of duty had been pleaded, the loss in respect of the secondary case had not been sufficiently pleaded. I do not accept that submission. The advice given by the solicitors that the former CEO would be entitled to the final portion of the LTIP scheme because there was no PILON clause was set out in paragraph 39(b) of the Amended Particulars of Claim. In paragraph 41(b) under breach of duty it was pleaded that it was a breach of duty to advise that there was an " indefeasible prospective right to the final portion of the incentive", and paragraph 31(a) had specifically referred to the failure to identify the reference to the conditions of service. This means that the fact of the advice about the vesting of the final portion of the LTIP, and the contention that the advice was a breach of duty, had been pleaded. In his submissions about loss Mr Pooles made reference to paragraph 56 in which it was pleaded in general terms that the solicitors' breach of duty had caused damage. However that does not take account of paragraph 48 of the Amended Particulars of Claim where it was pleaded " If the Defendant had acted in accordance with its duties, the termination would not have taken place" on the terms which were agreed. It was pleaded that Mr Perlman's aim was that the former CEO should receive the absolute minimum required to achieve his termination. It was pleaded in paragraph 48(b) that damages were to be assessed by reference to the value of the chances if Mr Perlman had acted differently and a plea as to percentage chances was then made.
In my judgment in these circumstances the loss in respect of the secondary case had been fairly pleaded. I also note that there had been no objection to the secondary case until closing submissions even though the secondary case had featured in the Skeleton Arguments and evidence. I am satisfied that this way of putting the case did not take the solicitors by surprise. In these circumstances I should record that if it had been necessary to ask for permission to re-amend the Particulars of Claim to advance the secondary case I would have granted such permission. This was because the point was fairly in issue, evidence had been led and examined at the trial on the point without objection, and the solicitors had been permitted by agreement to re-amend their defence on the eve of the trial and it would be fair to allow the CRU Group the same indulgence where no one had been taken by surprise and the case could be fairly considered.
Applicable legal principles
It was common ground that it is for me to determine what were the terms of the retainer as a matter of fact, see Minkin v Landsberg [2015] EWCA Civ 1152; [2016] PNLR 14 at paragraphs 38 and 41.
It was common ground that the relevant standard of skill and care applicable to the solicitors was that of the specialist employment lawyer willing to undertake work in relation to the matters which may arise when a corporate client is considering bringing, or wishing to bring, to an end the employment of a chief executive, see Wright v Lewis Silkin [2015] EWHC 1897; [2015] PNLR 718 at paragraphs 110–116.
It was common ground that when assessing damages when incorrect negligent advice has been given on the strength of which negotiations have taken place the first issue was for me to determine, on the balance of probabilities, whether the claimant would have acted differently if correct non-negligent advice had been given. If so, and if the negotiations are with a third party, it is then for me to assess whether the claimant had "a real and substantial chance of a better outcome" and not a...
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