Edenwest Ltd v CMS Cameron McKenna (A Firm)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Hildyard |
| Judgment Date | 14 May 2012 |
| Neutral Citation | [2012] EWHC 1258 (Ch) |
| Court | Chancery Division |
| Date | 14 May 2012 |
| Docket Number | Case No: HC10C02008 |
[2012] EWHC 1258 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr. Justice Hildyard
Case No: HC10C02008
Mr Nicholas Davidson QC and Ms Sian Mirchandani (instructed by Ward Hadaway) for the Claimant.
Mr Michael Harvey QC and Mr Lloyd Tamlyn (instructed by Simmons & Simmons LLP) for the Defendant.
Hearing date: 15 November 2011
Nature and scope of the Application
By an Application Notice dated 11 August 2011 the Defendant seeks (primarily) an Order for summary judgment under CPR Part 24; alternatively, it seeks an Order striking out the Particulars of Claim under CPR Part 3.4 or under the inherent jurisdiction of the Court (in each case as to the whole or part of the claim). The Defendant contends that the Claimant has no real prospect of succeeding on the claim (which alleges professional negligence); and that the Particulars of Claim disclose no reasonable grounds for bringing the claim and constitute an abuse of process.
The basis of the application is the Defendant's contention that the Claimant has not demonstrated any relationship between itself and the Defendant such as to give rise to a duty of care in either contract or tort. More particularly, the Defendant contends that (1) it was never retained by or on behalf of the Claimant, and in acting as solicitors to its administrative receivers it never became so: and that therefore there can be no sustainable claim in contract; and (2) that the common law does not impose upon an adviser to administrative receivers a duty of care owed to the company (the Claimant): so that there can be no claim in tort either.
The Claimant, on the other hand, contends that (1) a retainer between it and the Defendant to advise on certain aspects of an intended receivership sale of the Claimant's assets was established, ratified or novated immediately upon the appointment of administrative receivers with a view to effecting that sale, so that accordingly it has a contractual claim; and that (2) in advising on the merits of the Claims (as defined in paragraph 17 below) and their value the Defendant came under a duty owed to the Claimant to exercise reasonable skill and care in the course of the alleged retainer.
The case raises interesting issues as to the nature of the relationship and obligations between a company, its administrative receivers and those advising in the context of such a receivership, especially in the context of (as there was in this case) a "pre-packed" administrative receivership. The focus is sharper on the position of the advisers since the Claimant cannot pursue a claim against the administrative receivers ("the Receivers") and its only remaining potential claim is against their solicitors: for in this case, the Claimant released the Receivers from any claims it might have in relation to the administrative receivership long ago (in 2007).
The approach of the Court in adjudicating an application summarily to dispose of proceedings by way of summary judgment or to strike out the whole or any part of a claim (whether under the rules or the inherent jurisdiction of the Court) is well established. In each case the exercise of jurisdiction is discretionary: each case must be approached individually, and with a view to fulfilling the overriding objective of dealing with cases justly. Just adjudication includes stopping cases which have no reasonable prospect of success at trial before great expense is incurred, and before the Court's resources are further expended to no useful purpose.
In the context of CPR 3.4(2) and the inherent jurisdiction to strike out claims the focus is on the pleadings, and in particular, whether on analysis they disclose any reasonable grounds for sustaining the claim. In the context of CPR 24.2 the principal question is a slightly broader one: whether the party against whom the application for summary judgment is brought has any real prospect of succeeding on the claim or issue identified. In the latter context the Court must seek to determine whether at trial the prospects of success are so remote as to make the claim not fit to proceed at all.
Put shortly, the question is whether the claims as pleaded should be permitted to proceed, or whether a trial would be a waste of time and money. In determining that, the Court must not seek to assess the likelihood of success by conducting a mini-trial on the documents without discovery and without oral evidence: that is not the object of the powers of summary adjudication or striking out, which are designed to deal with cases that are simply not fit for trial at all.
All the above principles and guidance are set out in Three Rivers DC and Others v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 (especially at paras. 87 to 98) and Swain v Hillman [2001] 1 All ER 91 (per Lord Woolf MR, especially at pages 92 to 94). I have sought to bear them well in mind, especially given that this case has already been extensively pleaded (the statements of case so far stretch beyond 100 pages), and any dispute as to whether a duty of care existed is inherently fact-sensitive. Where there are substantive disputed issues of fact, it is not appropriate that I should speculate how eventually any such issue might be decided; save as regards facts which are common ground or on which there is no sensible controversy or which are inherently entirely implausible, I must in testing the viability of the claim take the facts to be as pleaded by the Claimant to be established.
Factual background
For present purposes, the following facts are not disputed.
In 2003 the Claimant was carrying on business as a wholesale distributor of perfumes and similar products from premises at Stonefield Way, South Ruislip, Middlesex.
The Claimant was owned and controlled by members of the Thakrar family. More precisely the shareholders were Nayan Thakrar (45%), his father Ramnik Thakrar (50%) and his mother Manjula Thakrar (5%), and each of them was a director.
Habib Bank AG Zurich ("Habib") were the Claimant's bankers. They held a debenture dated 30 May 1995 granted by the Claimant, and a legal charge over the Claimant's premises. Under the terms of the debenture and charge the Claimant was required to insure such premises either in the joint names of the Claimant and Habib or with the interests of Habib being required to be endorsed on the policies; and the charge extended expressly to monies payable under insurances in respect of such premises.
On the night of 7/8 August 2003 a serious fire occurred at the Claimant's premises. The premises were substantially destroyed, and stock and equipment was destroyed or damaged. The Claimant estimates its losses as exceeding £15 million.
The Claimant had, on the face of it, insurance cover in place (the limits on the various sections of which totalled £9,645,000) under two policies, one with Norwich Union ("NU") and the other with Royal and Sun Alliance ("RSA").
The Claimant had acted and placed those insurances through insurance brokers ("the Brokers").
In October and November 2003 NU and RSA repudiated the policies on the grounds of non-disclosure of material facts and/or misrepresentation. The Claimant blamed the Brokers for any inaccuracies in the insurance proposals on which the insurers relied.
Accordingly, the Claimant's assets included claims for damages against the Brokers and against the insurers, NU and RSA (together, "the Claims"). It is the Defendant's advice in relation to the Claims, and in particular its alleged failure to provide some mechanism to extract more value from them, which is alleged to have been deficient and negligent.
Further to the loss of its premises and stock and equipment without insurance cover the Claimant fell into substantial financial difficulty. By the end of 2003, the Claimant owed Habib over £4m. The Claimant was also indebted to two other secured creditors, Stenham Heller Trade Finance Ltd ("Stenham") and GMAC Commercial Finance Plc ("GMAC").
I have not understood it to be disputed that the Claims were comprised in the property charged to Habib; but I understand from a letter from the Defendant to KPMG dated 29 September 2004 that the interest of Stenham was also noted on the insurance policies and accordingly Stenham would have been entitled to part of any proceeds of the Claims.
The Claimant took advice from the firm of Shoosmiths, and obtained an Opinion from counsel, Clive Blackwood of Lamb Chambers ("Mr Blackwood's Advice") concerning the merits of Claims against NU, RSA and the Brokers. Put very shortly, the gist of Mr Blackwood's Advice was that the prospects of recovery against NU and RSA (the insurers) were poor, but that there was an arguable case against the Brokers which justified further investigation, although there were likely to be problems in establishing causation. A copy of Mr Blackwood's Advice was sent to Habib on 9 January 2004 under cover of a letter from Shoosmiths which warned that any assessment of the Claims was "subject to extensive further investigations" and that "this is no doubt going to be a very costly exercise for [the Claimant] for which they will need funds.".
Turning to other charged assets. On about 22 March 2004 Matthews & Goodman were engaged by Habib to prepare a valuation of Edenwest's land and premises. Their report of 19 April 2004 advised a value of £1.6m.
It is common ground that on about 29 March 2004 the Defendant was retained by Habib. In about May and/or early June 2004, Habib and the Defendant (with the knowledge and support of the other charge holders) turned to consider the possibility of appointing administrative receivers in...
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