Gribbon v Lutton
| Jurisdiction | England & Wales |
| Judge | Mr Justice Laddie,Lord Justice Robert Walker |
| Judgment Date | 19 December 2001 |
| Neutral Citation | [2001] EWCA Civ 1956 |
| Docket Number | Case No: A3/2000/3566/CHANF |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 2001 |
[2001] EWCA Civ 1956
Lord Justice Pill
Lord Justice Robert Walker and
Mr Justice Laddie
Case No: A3/2000/3566/CHANF
IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (JACOB J)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr N Dowding QC (instructed by Bevan Ashford, Bristol BS1 4TT for the appellant)
Mr D Drake (instructed by Beachcroft Wansbroughs, Bristol BS99 7UD for the respondents)
This is an appeal from a judgment of Jacob J dated 15 November 2000 whereby he dismissed Mr Christopher Gribbon's action for professional negligence against Mr Christopher Lutton and Luttons Dunford (the defendants), his former solicitors.
The background to this dispute
The essential facts are as follows. Mr Gribbon was negotiating to sell some land to a Mr Wynn. As a result of difficulties encountered during the negotiation, by December 1993 Mr Gribbon was seeking from Mr Wynn a non-refundable deposit of £21,600. It was to be held by Mr Lutton as stakeholder on the basis that (i) if a binding contract was entered into, it would be treated as the deposit, (ii) if no contract was entered into for any reason other than the default of Mr Gribbon it was to be paid to him, and (iii) if no contract was entered into owing to the default of Mr Gribbon it was to be repaid to Mr Wynn.
A meeting was held on 9 December 1993 which was attended by, amongst others, Mr Gribbon and Mr Wynn and their respective solicitors, Mr Lutton and Mr Robins. Mr Wynn was reluctant to pay a non-refundable deposit. Mr Gribbon threatened to walk away from the negotiations. Eventually Mr Wynn wrote out a cheque and handed it to Mr Lutton. He paid it on the basis that it would be non-refundable if he failed to enter into a conditional contract by 15 December. In the event no contract was signed. Both Mr Gribbon and Mr Wynn claimed the deposit. Then Mr Lutton's firm, Luttons Dunford, issued interpleader proceedings. At an early stage in those proceedings, Mr Lutton appreciated that there might be a conflict of interests between him and his client and, as a result, he ceased acting for Mr Gribbon who was thereafter represented by different solicitors.
The interpleader proceedings came on for trial in March 1996 before Mr Recorder Greenwood. Mr Gribbon's case, supported by evidence from Mr Lutton, was that (i) Mr Wynn had agreed that the deposit would be non-refundable in the event that a conditional contract was not entered into by 15 December 1993 for any reason other than Mr Gribbon's default, and (ii) in return, Mr Gribbon had agreed that he would not deal elsewhere until that date (that is to say there was a 'lock-out' agreement). Both of these were disputed by Mr Wynn.
Apparently it was common ground before the Recorder that if it had been agreed that the deposit was non-refundable, Mr Gribbon would nonetheless only be entitled to the deposit if he could show that he had provided consideration in the form of the lock-out agreement. The Recorder found that (i) the deposit was paid by Mr Wynn on the basis that it would be non-refundable if he failed to sign a conditional contract, but (ii) there was no lock-out agreement. In the absence of the only consideration asserted, the Recorder found that the agreement that the deposit was not refundable was unenforceable. The result was that the deposit was repayable to Mr Wynn. Mr Gribbon's lawyers advised him not to appeal. Luttons Dunford complied with Mr Recorder Greenwood's decision and paid the deposit back to Mr Wynn.
The current proceedings
In November 1996, Mr Gribbon commenced the present proceedings for negligence against the defendants on the ground that either Mr Lutton should have ensured that the agreement that the deposit was non-refundable was legally enforceable or he should have advised that it was not.
The trial took place before Jacob J on 15 November 2000. The defendants took only one point, namely that, contrary to the decision of Mr Recorder Greenwood, Mr Gribbon and not Mr Wynn was entitled to be paid the deposit. If this were right, then Mr Gribbon could not have been negligent. On the other hand if the deposit was not payable to Mr Gribbon, as the Recorder had held, the defendants were liable for negligence, the only remaining issue being quantum. In these circumstances, there was no challenge to any of the Recorder's findings of fact but the defendants contended that he was wrong in law. For that reason, no evidence was called and Jacob J did not make any new findings of fact.
Before the judge, Mr Gribbon advanced two arguments. First, he said that Mr Recorder Greenwood's decision was correct. The deposit was refundable to Mr Wynn. Second, he said that, even were that not the case, the defendants were precluded from asserting otherwise. They had participated in the proceedings before the Recorder and were estopped from asserting that the deposit was non-refundable.
Jacob J did not accept either of these arguments and found for Mr Lutton and his firm. As Mr Dowding, who appeared before us on behalf of the appellant, put it in his skeleton argument, the result is that in two separate legal proceedings both involving Mr Gribbon and the defendants, two different Judges have come to opposite conclusions on the same facts. As between Mr Gribbon and Mr Wynn, Mr Gribbon is not entitled to the deposit, but as between him and the defendants, he is.
On this appeal, Mr Dowding has argued that the judge was wrong on both the issues before him. It is convenient to consider first the issue of whether the deposit was non-refundable.
Was Mr Gribbon entitled to the deposit held by Luttons Dunford?
The starting point in answering this question is a determination of the nature of the relationship between the stakeholder and the parties who have an interest in the deposit. Since this case relates to the proposed purchase of land, it is convenient to refer to the parties as the vendor, the purchaser and the stakeholder. It is important to bear in mind that in a normal case there exist two distinct contracts. The first is the contract between the vendor and purchaser which determines when and to whom the deposit will be paid. The second is the contract between the vendor and purchaser on the one hand and the stakeholder on the other. Since in the type of situation being considered here there are three parties, this latter contract has been referred to in the authorities as tripartite. The scope and purpose of the tripartite contract is very limited. It provides that the stakeholder shall keep the deposit pending a triggering event and then shall pay in response to that event. It is no part of the function of the tripartite agreement to create the triggering event. The matter can be put another way; the vendor/purchaser contract determines who is entitled to the deposit after the triggering event, the tripartite agreement provides that the stakeholder must deal with the deposit in accordance with the entitlement to it defined by the vendor/purchaser contract and, until the triggering event, he must retain it in accordance with the joint instructions of the vendor and purchaser. Therefore the tripartite contract does not create either the vendor's or purchaser's entitlement to the stake, but gives effect to the entitlement as between them which is determined by the vendor/purchaser contract. Although the two contracts may be entered into at the same time, that need not be so.
Since the tripartite contract does not define entitlement between vendor and purchaser but responds to an entitlement determined elsewhere, what happens in a case where the deposit is paid by the purchaser to the stakeholder in advance of there being any enforceable contract between him and the vendor? Prima facie, since it is the purchaser's money and the vendor has no legal entitlement to it, the purchaser can demand its return to him at any time in advance of an enforceable vendor/purchaser contract being put in place. Thus if there is an unenforceable promise by the purchaser to pay a sum of money to the vendor, the vendor acquires no legal entitlement to it and the fact that the sum may have been paid to a stakeholder does not create an entitlement to it. The stakeholder can and must respond to a demand for repayment by the purchaser. The tripartite agreement does not alter who is and who is not entitled to the deposit.
This analysis is supported by authority. The necessity for distinguishing between the vendor/purchaser contract on the one hand and the tripartite contract on the other is clear from the judgment of Millett LJ, as he then was, in Manzanilla Ltd v Corton Property And Investments Ltd [1996] EWCA Civ 942:
"26. Where a stakeholder is involved, there are normally two separate contracts to be considered. There is first the bilateral contract between the two principals which contemplates two possible alternative future events and by which the parties agree to pay a sum of money to a stakeholder to abide the happening of one or other of them. In the present case it consisted of a series of written contracts for the sale of land, and the relevant events were the failure of the contracts by the repudiatory breach of one party or the other. The second contract is the tripartite contract which results from the deposit of the money with the stakeholder on terms that he is to keep it until one or other of the relevant events happens and then pay it to one or other of the parties accordingly. The stakeholder is a party to the...
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