Finlan v Eyton Morris Winfield and another
| Jurisdiction | England & Wales |
| Judge | THE HON MR JUSTICE BLACKBURNE |
| Judgment Date | 23 April 2007 |
| Neutral Citation | [2007] EWHC 914 (Ch) |
| Docket Number | Case No: HC06C00254 |
| Court | Chancery Division |
| Date | 23 April 2007 |
[2007] EWHC 914 (Ch)
the Hon Mr Justice Blackburne
Case No: HC06C00254
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Bernard Weatherill QC and James Pickering (instructed by Bell Lax) for the Claimants
Michael McLaren QC and Mark Simpson (instructed by Mills & Reeve) for the 1 st Defendant
Nicholas Peacock and David Mumford (instructed by Speechly Bircham) for the 2 nd Defendant
Hearing dates: 15 th, 16 th, 19 th, 20 th and 21 st March 2007
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.
Mr Justice Blackburne:
Introduction
I am in the course of trying claims by the first claimant, John Finlan (“Mr Finlan”), as assignee of the second claimant, Queenswood 100 Ltd (“Queenswood”), against the defendants. Those claims arise out of the circumstances in which Queenswood acquired the entire issued share capital of SP Engineering Ltd (“SPEL”) and its subsidiaries (together “the Group”) by a share purchase agreement (“the SPA”) entered into on 29 June 1998. The defendants are sued in negligence. The first defendants, Eyton Morris Winfield (“EMW”), are solicitors; the second defendants, Grant Thornton, are accountants.
The claims are concerned with the fact that Queenswood discovered, following completion of its purchase, that there was much less “surplus cash” in the Group at completion than it understood that there would be. In August 2000 administrative receivers were appointed of Queenswood's assets and undertaking and on 4 May 2004 it went into compulsory liquidation. Mr Finlan alleges that the defendants are to be blamed for the fact that Queenswood was not alerted to this shortfall prior to entering into the SPA at a lengthy completion meeting at EMW's offices on 29 June 1998. Substantial damages are claimed. The defendants deny liability. Causation and damages are also very much in issue. I do no more than summarise in the barest outline what the action is about.
This judgment is concerned with a challenge by the two defendants to Mr Finlan's right to pursue such claims of action against them as Queenswood may have had. It is not in dispute that he is an assignee of Queenswood's rights of action. What is in dispute is when he took that assignment and, depending on how that issue is determined, whether it is now open to him to maintain his present claims.
The claim form states that Mr Finlan brings his claims as assignee of Queenswood's rights against the defendants. He is able to rely on a deed of assignment dated 28 June 2004 and made between (1) Queenswood (described in the deed as “the Company”), (2) Gerald Davis (described in the deed as “the Liquidator”) and (3) Mr Finlan (described in the deed as “the Assignee”). By clause 1 of that deed it is provided that
“The Company acting by the Liquidator hereby transfers conveys and assigns (insofar as the Company is able but not further or otherwise) to the Assignee subject to the Debenture all those rights and/or claims and/or causes of action (howsoever arising) of the Company in relation to the Claims …”
“Claims” is defined in the deed as the “rights and/or claims for breach of contract and/or negligence against … its professional advisers Eyton Morris Winfield …and Grant Thornton arising out of the Company's purchase of SP Engineering Ltd and its subsidiaries …”. The expression “Debenture” is a reference to a debenture in favour of National Westminster Bank plc dated 29 June 1998. It was pursuant to the powers in that debenture that the administrative receivers were appointed.
It is common ground that the deed was entered into and took effect at 4.45 pm on 28 June 2004 which was just within the six year limitation period relating to the assigned claims. The limitation period expired the following day. It is also common ground that the deed was effective as an equitable assignment of Queenswood's causes of action against the defendants. It remained effective in equity (only) until notice was given to the defendants in mid-October 2004, just under four months later, when, on compliance with the requirements of section 136 of the Law of Property Act 1925, the assignment became statutory in effect.
In paragraph 37 of the particulars of claim, however, the following allegation was introduced by way of an amendment with the court's permission (at a time when the action was proceeding in the Birmingham County Court):
“37(a) At or about 12.30 p.m. on 28 th June 2004 the Second Claimant [ie Queenswood] agreed for consideration to assign the causes of action, the subject of this action, to the First Claimant [ie Mr Finlan].
(b) In the premises the said agreement created an equitable assignment of the said causes of action.
(c) At or about 1.30 p.m. on 28 th June 2004 the claim form was issued.
(d) At about 4.45 p.m. the assignment completed and the assignment became an assignment at law pursuant to section 136 of the Law of Property Act 1925.”
One of the many issues between the parties has concerned the circumstances in which that allegation came to be pleaded and whether, as the pleading alleges, the assignment to Mr Finlan of Queenswood's causes of action did take place before the claim form was issued (and notwithstanding the subsequent deed of assignment) and if, contrary to paragraph 37, it did not (but only occurred under and by force of the deed of assignment) whether Mr Finlan should be given permission to amend the particulars of claim to rely on the deed of assignment. Since the determination of these questions turned on factual issues and submissions unrelated to those concerned with the circumstances in which the SPA came to be completed and since, if these questions were decided in the defendants' favour, Mr Finlan's claims could proceed no further, I agreed to deal with them separately from and in advance of the remainder of the matters arising for decision at this trial. As it turned out, almost five days of court time were taken up dealing with them.
The background
To explain how they arose, it is necessary to set out some background.
It is not in doubt that Queenswood was placed in liquidation (on a petition to wind up presented by Mr Finlan) and Mr Davis's appointment as liquidator came about as a result of Mr Finlan's wish, when it was realised that Queenswood's administrative receivers would not be willing to pursue any claims against the defendants, to take an assignment of Queenswood's causes of action against the defendants so that he could pursue them as assignee. Letters of mid-October 2006 from Mr Finlan's solicitors, Bell Lax, putting the defendants on notice of Mr Finlan's claims stated in terms that Mr Finlan was bringing his claims “as assignee of the Company's [ie Queenswood's] rights pursuant to an assignment dated 28 June 2004.” In later correspondence Bell Lax identified the assignment as the deed of assignment described above.
When, as a result of further enquiries by Mills & Reeve, the solicitors acting for EMW, it emerged that the deed had been entered into after the claim form had been issued, Bell Lax asserted on 20 May 2005 for the first time that an oral agreement had been made by Mr Davis with Mr Finlan on 25 May 2004 for the assignment to Mr Finlan of Queenswood's causes of action and that the deed “simply recorded that earlier agreement”.
It is plain, although those representing Mr Finlan have not abandoned the contention, that no oral agreement—if by that is meant an oral agreement on all of the terms upon which Queenswood, through Mr Davis, would be willing to assign the causes of action to Mr Finlan—was made on 25 May 2004. That very day, Mr Richard Cooper, an assistant solicitor with Bell Lax who had day-to-day responsibility for the matter, compiled a file note of a conversation with Mr Davis recording that Mr Davis was prepared to accept appointment as Queenswood's liquidator (he was appointed later that day) on the basis that he would be paid £5,000 and that the question of the assignment and the “percentages” (ie how the proceeds of any claim would be shared between Mr Finlan and Queenswood) could be dealt with later. On 17 June 2004, Mr Davis faxed to a colleague of Mr Cooper “a Deed of Assignment (draft) with which I would be happy, though it is, of course, still subject to agreeing percentages” (emphasis added).
It was the perceived need on the claimants' side to establish, in response to an application by EMW in July 2005 (followed by a similar application by Grant Thornton in September 2005) to strike out Mr Finlan's proceedings, that the assignment had pre-dated the issue of the claim form that paragraph 37 was sought to be introduced. What in particular had prompted the amendment was, among the matters raised by the strike-out applications, the assertion by those advising the defendants that there was no substance to the contention that the assignment was made on 25 May 2004 (or at any other time prior to the deed itself) and accordingly that at the time the claim form was issued there had been no assignment to Mr Finlan who could not therefore describe himself in the claim form as assignee of Queenswood. It was also complained that the particulars of claim failed to refer to any assignment (whatever its date). At a hearing in Birmingham County Court in November 2005, the claimants obtained—I am told without opposition from the defendants—the court's leave to make the proposed amendment which became paragraph 37 of the...
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