Floods of Queensferry Ltd and Another v Shand Construction Ltd and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUXTON,the President,LADY JUSTICE HALE,THE PRESIDENT |
| Judgment Date | 29 May 2002 |
| Neutral Citation | [2002] EWCA Civ 918 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 May 2002 |
| Docket Number | No A1/2001/1444 |
[2002] EWCA Civ 918
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF HIS HONOUR JUDGE LLOYD QC
The President
(Lady Justice Butler Sloss)
Lord Justice Buxton
Lady Justice Hale
No A1/2001/1444
A1/2001/1453
MR C REESE QC and MISS C DOERRIES (Instructed by Lovells of London) appeared on behalf of the Appellants
MR C GIBSON QC (Instructed by McGrigor Donald of London) appeared on behalf of the First Respondent
MR A STEINFELD QC and MR E CULLEN (Instructed by Winward Fearon of London) appeared on behalf of the Second Respondents
I refer to the various protagonists as follows: Strand Construction Ltd ("SCL"), Floods of Queensferry ("FOQ"), Mr David Charles Flood ("Mr Flood") and Winward Fearon ("WF").
There are two appeals before the court, both of which arise from a very lengthy construction dispute that was tried before His Honour Judge Lloyd QC. The appeals concern matters relating to costs that the judge had to determine subsequently to the conclusion of the main proceedings. The judge delivered what was, if I may be permitted to say so, an extremely helpful and detailed judgment in which the history is set out in detail, as are the authorities that were put before him. For that reason it is not necessary for me to say more than a very few words to make sense of the rest of this judgment. Any further detail that is required can be collected from Judge Lloyd's judgment, which has not been, in this respect, criticised before us at all.
FOQ were sub-contractors on a building project. In October 1994 they commenced proceedings against SCL, the main contractors on that project, in which they claimed payment of monies owed and also damages for misrepresentation. In March 1995 SCL made a payment into court in respect of those claims in the sum of £350,000. That sum was described by SCL's counsel, Mr Colin Reese QC, as having been generous. Whether or not that was a correct characterisation of it, the fact that the payment was not taken out—and in due course as we see FOQ did not succeed in beating it—was a significant matter of criticism adduced in these proceedings on SCL's part.
FOQ, throughout the proceedings, had difficulties in funding its claim in the action. In 1995 security was obtained in the sum of £75,000 and the proceedings were stayed until that amount was paid. The principal director and, I think, majority shareholder in FOQ was Mr David Flood ("Flood"), other members of his family—this being a comparatively small family company—being involved in the company in other capacities. There is no doubt that it was Flood who drove the affairs of FOQ and took, as the judge found, an extremely close interest in the litigation, going beyond that which one would normally expect on the part of a director who was not a qualified lawyer. Mr Flood was involved in a number of interlocutory moves designed to ease the course of FOQ in the course of these proceedings. In January 1996 he obtained legal aid as an assignee of FOQ's claims. That assignment was later struck down by this court. He then obtained legal aid to act as fiduciary to FOQ but that grant of legal aid was quashed in judicial review proceedings in this court.
There were continuing exchanges between WF and Flood with regard to payment of WF's fees. From about December 1996 WF sought as a condition, stressed with varying degrees of intensity, of continuing to represent the company a personal guarantee from Mr Flood in respect of fees owed by FOQ to WF. In June 1997 however FOQ put in place a legal expenses insurance policy issued by a company called Greystoke, and thereupon WF did not pursue its request for a formal guarantee by Mr Flood. That policy, in its terms, covered costs owed by both Mr Flood and FOQ in the context of this particular litigation and covered exposure they might have either to their solicitors, WF, or to what was described in the policy as the nominated party, meaning thereby the opposite party SCL. The terms of that policy, the circumstances in which it was entered into and the legal implications of all those matters, are heavily in dispute in one of these appeals.
While all these exercises were going on the main action was proceeding. It was heard in two parts by Judge Lloyd; first, the claim for costs and, secondly, the misrepresentation claim. The misrepresentation claim failed. The claim for payment was partly successful though at a level significantly less than FOQ claimed and significantly less than the money already paid into court. Because of those two circumstances SCL was awarded a substantial costs order. FOQ did not have and does not have funds to meet those claims. We were told it is now the case that FOQ has really only been kept in existence in order to pursue the litigation. It is believed to be—indeed, there is no doubt I think that it is—significantly insolvent. But—a matter again to which I will have to return—it has never been put into liquidation.
Faced with the most unwelcome circumstance that SCL had defended the litigation, where it had very significant doubts about the funding of the other side, and where it had made a significant payment into court which in due course, by a judge's ruling, had been shown to be relevant, SCL sought other ways (other than directly attacking FOQ) to recover its costs. It first started proceedings under Section 51 of the Supreme Court Act 1981 against Mr Flood, making various allegations in that connection to which I shall have to return. Having received the evidence and disclosure that was originally ordered in those proceedings, SCL then formed the view that WF were also vulnerable to a Section 51 order, and they also were joined in the capacity as Part 20 defendants for that claim to be pursued against them.
There was then the matter of the proceeds of the insurance policy. The limit of the insurance policy was £200,000. Although it does not appear that a formal claim was made by or on behalf of FOQ, or at least we have not seen one, it was clear to the insurers that they were liable up to the limit of the policy. It will be recalled that the insured under the policy were both Mr Flood and FOQ. But at that stage, the Section 51 proceedings still being unresolved, only FOQ had an actual obligation as to costs; and therefore it was, in the event, the only beneficiary of the policy.
SCL, understandably, were anxious to secure, if possible, the whole of that fund or, if they did not succeed in doing that, at least to ensure, pending the outcome of the costs proceedings generally, that it did not disappear in a direction inappropriate for its disposition in view of the reason why it was in existence in the first place. Originally, SCL sought relief from Judge Lloyd in terms of a restraining order or something that approached what was I think at that time still called a Mareva injunction. As we understand it, the judge saw difficulties about that but suggested instead that SCL should seek a garnishee order nisi in respect of proceeds of the Greystoke insurance policy.
There was then a number of complicated exchanges as to whether to garnish the proceeds of an insurance policy was an appropriate procedure. Rather than become entangled in those complications Greystoke, sensibly enough, decided that it would seek or agree to an order that it should simply pay the money into court and await the court's order as to how the money should be discharged. Though I think it was not quite expressed as such—Greystoke were effectively paying the money into court by way of interpleader. There is no other basis, as far as I can see, upon which it could be said that money could be brought within the court's control. The money being in court, there is an active dispute between SCL and WF as to which, if either, of them should receive the £200,000, and in what proportions, if any. That dispute was listed for hearing before Judge Lloyd at the same time as he dealt with the Section 51 claims. There were no formal proceedings. The matter was dealt with perfectly sensibly on an interlocutory or ancillary basis.
The judge dealt with the two claims together, one after another, as this court has ordered the two matters to be dealt with one after another, although not informally conjoined appeals. He did so by reference to five questions he set out in paragraph 4 of his judgment. The shape of this judgment does not exactly follow the structure of those questions but they provide a useful agenda to show what was before the judge and is before us:
"The issues which I have now to determine are agreed and are the following:
1. Did the second claimant, Mr David Flood, fund and/or maintain and/or finance the proceedings, or any part thereof, brought by the first claimant against the defendants?
2. Is it just in all the circumstances to make Mr David Flood pay the unrecovered costs (or a proportion thereof or a fixed lump sum representing a part of the unrecovered costs) of the proceedings?
3. Does the court have jurisdiction to make an order against Winward Fearon? Did the second Part 20 defendant, Winward Fearon, fund and/or maintain and/or finance the proceedings or any part thereof, brought by the first claimant against the defendants?
4. Is it just in all the circumstances to make Winward Fearon pay the unrecovered costs (or a proportion thereof or a fixed lump sum representing a part of the unrecovered costs) of the proceedings?
5. To whom should the insurance monies which were paid into Court pursuant to the order dated 9 June 2000 be paid?
(The last issue refers to legal...
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