County Leasing Asset Management Ltd and Anor v Michael Green Plant Ltd and ORS
| Jurisdiction | England & Wales |
| Judge | Lord Justice Elias,Lord Justice Stanley Burnton,Lord Justice Ward |
| Judgment Date | 02 February 2012 |
| Neutral Citation | [2012] EWCA Civ 53 |
| Date | 02 February 2012 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2011/0035/CCRTF |
[2012] EWCA Civ 53
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORTHAMPTON COUNTY COURT
HER HONOUR JUDGE HAMPTON
8NN00973
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Ward
Lord Justice Stanley Burnton
and
Lord Justice Elias
Case No: B2/2011/0035/CCRTF
Mr Jeffery Deegan (instructed by Summers Nigh Law LLP) for the Appellants
Miss Bridget Williamson (instructed by Messrs Shakespeares) for the Respondents
Hearing date : 25 January 2012
The appellants are appealing an Order of damages made against them by Her Honour Judge Hampton in the Northampton County Court. The appellants were the claimants in the case before her. They are companies engaged in the business of providing finance.
Mr Hawkes, the second respondent, is and was the director and shareholder in a number of companies, including Quotepool Limited, the third respondent, and MGP2, the first respondent. He formerly carried on the business of demolition and clearance works through a company registered as Michael Green Plant Limited (MGP1). (MGP2 was initially called Telerate Limited but its name was changed when, for reasons I give below, it effectively took over the business of MPG1.)
In autumn 2004 this company was in serious financial difficulties. It owed some £312,000 to the Revenue. On 7 October the Revenue presented a Winding Up Petition against the company and this was due to be heard on 17 November 2004. The company had assets in the form of plant and machinery and also approximately 45 acres of potential development land in Northamptonshire. The land was valued in January 2004 at £140,000.
Mr Hawkes wished to raise some £350,000 to pay off the debts. He was introduced by an associate to Andrew Kirkpatrick, the director and owner of the appellant companies. Mr Kirkpatrick was accompanied at the meetings by Gordon Cook. He introduced Mr Cook to Mr Hawkes as an independent consultant with experience in helping distressed and insolvent companies.
Mr Hawkes, on behalf of MGP1, authorised Mr Cook to act on behalf of that company. Subsequently, through the offices of Mr Cook, a number of agreements were entered into between the appellants and MGP1. The appellants paid £110,000 to purchase the land owned by and a further £115,000 to purchase various items of plant and equipment from MGP1, and from Green Plant Services Limited, another company in which Mr Hawkes had an interest. Subsequently, following some interim contracts the details of which are not relevant to this appeal, the equipment was leased to MPG2. It had always been understood that this would happen. Effectively MPG2 was taking over the business of MPG1. Had all the payments been made, MPG2 would have paid around £116,000 for the first lease of equipment and £42,000 for the second. MPG2 would never have gained ownership of the equipment; the property was to remain with the second appellant at the end of the lease.
The attempt to save MPG1 was unsuccessful and on 28 January 2005 it went into administration, and subsequently liquidation. Liquidators were appointed. MGP2 carried on paying the rental hire until November 2007 when it ceased to do so. Shortly thereafter the appellants terminated the agreements and issued proceedings on 26 March 2008 claiming delivery up or damages in default and outstanding rentals together with interest. We were told that at some point an order for delivery up was obtained against MPG2 and some, but not all, of the equipment was returned.
The defendants (respondents to this appeal) alleged that they have been the subject of negligent representations and had been induced as a consequence to enter into these arrangements. They conceded that rescission was not available but sought damages by way of counterclaim.
The trial took place between 16 and 19 August. The draft judgment was sent out in October 2010. The judge found in favour of the defendants, concluding that Mr Hawkes had on their behalf relied on and been induced by various misrepresentations. These included the representation that Mr Cook was an expert in assisting insolvent companies, would act in the interests of the respondent companies, and that his fees would be around £15,000. The judge found that he was in fact an undischarged bankrupt who put his own interests first.
Moreover, the fees paid to Kirkpatrick and Cook amounted together to some £135,000, and there were additional legal fees of almost £50,000. It seems that MGP1 did not get more than about £40,000 from the contracts. It is difficult to dissent from Lord Justice Stanley Burnton's observation that the conduct of the appellants was scandalous.
The first respondent, MPG1 then went into administration in 2005 and it subsequently went into liquidation. Shortly thereafter, MPG2 entered into the lease agreements. As the judge pointed out, the fact that there were no misrepresentations made directly to this company did not assist the appellants since in law the misrepresentations are deemed to continue in these circumstances. The judge relied in this context on Yorkshire Bank plc v Tinsley [2004] 1 WLR 2380. MPG2 continued to pay the rent on the equipment until November 2007 when it ceased to do so. At about the same time Quotepool, who had taken a lease back on the property, also stopped paying the rent on the property. This led to legal proceedings. We are not concerned with the lease on the property in this appeal. Nor are we concerned with any claim which the liquidators of MGP1 might have had against the appellants or Mr Kirkpatrick or Mr Cook. No proceedings were in fact pursued. The focus of this appeal is solely on the damages which MPG2 is entitled to recover from the appellants as a consequence of paying for the equipment.
Following the judgment, there was a further hearing at which the judge heard submissions on remedies and costs. This was on 29 November. At that stage the appellants applied to adduce evidence on the cost to MGP2 of hiring equivalent equipment elsewhere. The purpose, as the judge understood it, was to submit that MGP2 had suffered no loss because the rate at which it had been able to hire the equipment from the appellants was lower than the market rate. That application was refused on the ground that it was too late; the judge said that this was never the way in which the argument had been advanced at trial, and that the case had never been put to the witnesses of the respondent.
The judge awarded MGP2 damages. The judge concluded, correctly, that the appropriate measure of damages in a misrepresentation case of this kind was to ask what would have happened if the agreement had not been entered into. The judge accepted that there was little hard evidence about that. However, she concluded that on the balance of probabilities MGP1 would have gone into liquidation and Mr Hawkes would have made arrangements to acquire the equipment from the liquidator. She considered that he would have raised the money using the land on which the business operated—and, if necessary, his personal flat—as security. She then assessed that the cost of buying the equipment from the liquidator would have been £55,000.
The only evidence about this to which the judge expressly referred was the evidence of Mr Hawkes. It was his opinion that the equipment would cost between £40-£55,000 from the liquidator, and she took the top end of that bracket. She recognised that it was unsatisfactory that there was no independent evidence as to the value of the equipment.
Having identified what MPG2 would have done, she concluded that the measure of damages would be the sums actually paid by MGP2 under the leases less the cost of acquisition (which would include interest on the capital borrowed to make the purchase). The parties agreed what the figure would be on the assumption that the judge's analysis was correct. This was just over £50,000. Interest was also awarded at 8%. The judge recognised that in view of the fact that the appellants kept the equipment, this would not compensate MGP2 for the fact that on the alternative scenario they would have retained ownership of the equipment. She dealt with this by setting off the residual value against certain property claims which the appellants had against MPG2. Miss Williamson, counsel for the respondent, makes no complaint about that.
It should be noted that in fixing the value of the equipment at £55,000 the judge expressly considered and rejected two alternative assessments advanced by the appellants' counsel. First, Mr Hawkes himself had said in evidence that the "nearest reasonably available equipment cost more than £100,000". The judge did not accept that this was a statement as to the value of this equipment bought from the liquidator, but rather the cost on the open market of such equipment.
She also rejected a submission from the appellant that she should adopt the original transaction figure of £115,000 on the grounds that the parties put this value on the equipment not because it was a genuine estimate of the true value but in order to provide the requisite payments (the judge called them "kickbacks") for Mr Kirkpatrick and Mr Cook for their role in these transactions.
The grounds of appeal.
The appellants submit that the judge erred in law in adopting this approach to the measure of damages. There are essentially five grounds advanced by Mr Deegan, their counsel, in his written and oral submissions.
First, he submitted that the starting premise of...
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Hawkes and Another v County Leasing Asset Management & Others
...be seen in particular from the judgment of the Court of Appeal in previous proceedings between the same parties, County Leasing Asset Management Ltd v Michael Green Plant Ltd [2012] EWCA Civ 53, Mr Hawkes has been the victim of scandalous behaviour on the part of at least some of the presen......