Halliwells LLP v NES Solicitors

JurisdictionEngland & Wales
CourtQueen's Bench Division
JudgeHHJ MCCAHILL QC
Judgment Date23 Feb 2011
Neutral Citation[2011] EWHC 947 (QB)
Docket NumberCase No: HC0901045

[2011] EWHC 947 (QB)

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

(sitting at BRISTOL CIVIL JUSTICE CENTRE for judgment only)

2 Redcliff Street

Bristol

BS1 6GR

Before:

His Honour Judge Mccahill Qc

Case No: HC0901045

Between:
Halliwells LLP
Claimant
and
Nes Solicitors
Defendants
and
Quinn Direct Insurance Limited
Third Party

MR JOSHUA MUNRO appeared for the Defendant

MR FRANCIS BACON (instructed by Levi LLP) appeared for the Third Party

(As approved)

HHJ MCCAHILL QC

Introduction:

1

This is an action brought by the defendants, NES Solicitors ('NES'), against the third party, Quinn Direct Insurance Ltd ('Quinn'), the professional insurers of NES, for a declaration that Quinn must indemnify NES in respect of a claim ('the claim') brought against NES by the claimant's solicitors Halliwells LLP ('Halliwells'). Halliwells is now in administration. The claim was for the enforcement of an undertaking (the Halliwells undertaking) given by NES to Halliwells on 22 December 2008 to pay Halliwells the sum of £1,500,000 on or before 10 March 2009. That undertaking was given by NES when, acting on behalf of NES's client, Dr Hassan – that is either H-A-S-A-N or H-A-S-S-A-N–who was otherwise known as either Mr or Dr Ahmed.

2

That undertaking was given by NES to Halliwells for the benefit of Halliwells' client, General Capital Finance Ltd ('GCF'). GCF is also now in administration. GCF intended to and, in fact, relying on the NES undertaking, ultimately did make a bridging loan of £1 million to Green Crown Properties Ltd ('Green Crown') on 23 December 2008 to be used as a deposit on a contract to buy all the issued share capital in Stratford Edge Ltd ('Stratford Edge'), but repayable on 11 March 2009. GCF had charged Green Crown an administration fee of £450,000 for making this bridging loan, which was to be added to the facility, requiring a total repayment of £1.45 million on 11 March 2009.

3

Stratford Edge, a company controlled by Leslie Serlui and JT Whyman, owned land at 80-92 High Street, Stratford, London close to the site to be used for the 2012 Olympic Games. The idea was to develop this site into a 27-storey skyscraper complex comprising, amongst other things, a large number of flats. Green Crown was controlled by John Bayle, an Irishman who was a business associate of Dr Hassan. It seems that Dr Hassan was himself to be a potential investor in the development. Apparently, he was willing to buy 25% of the shares in Green Crown for £1.5 million, either as an investment or as security for advancing that sum, directly or indirectly, to Green Crown.

4

Green Crown and Mr Bayle were represented by Arthur Barnes Solicitors, although Halliwells had previously acted, in wholly unrelated matters, for Mr Bayle. In my judgment, Mr Shillingford and Mr Carter, the partners in NES, enquired into only a fragment of the overarching commercial transaction, before giving their undertaking to Halliwells. By contrast, their client, Dr Hassan, knew all about the overarching commercial transaction and about all its components and strands.

NES:

5

NES was a small firm, established on 1 March 2004, occupying an office at Suite 39C Imperial House, 64 Willoughby Lane, London, N17. At all times material to this case, there were two partners in NES: Newford Eustace Shillingford (hence 'NES') and Isaac Carter. Mr Carter was a salaried partner who only worked part-time at the practice, as he was at the same time, also employed as a Local Authority solicitor. Mr Shillingford was obviously the managing partner. Mr Carter had no access to the firm's bank account, nor was he shown the bank mandate as an authorised signatory. Mr Carter ceased to have any involvement in NES on 31 October 2009. The firm itself has since ceased trading. The firm's turnover had fallen from £125,000 in 2007 to £84,259 in 2008. In his third witness statement, Mr Shillingford described how the firm had 'experienced a massive downturn in the chargeable work it has been used to dealing with and finances have been severely stretched since about July 2008'. The highest fee for commercial conveyancing in the last year had allegedly been £1,500.

The Claim Brought by Halliwells against NES:

6

Halliwells served the claim form and details of claim on the 3 rd April 2009. The claimant sought enforcement of the Halliwells undertaking given on 22 December 2008. The Halliwells undertaking given by NES was in the following terms:

'Our client: Dr Hassan Ali Hasan

We hereby confirm we are holding funds from our client in the sum of £1,500,000.00 sterling (One Million Five Hundred Thousand Pounds).

We hereby undertake to pay the sum of £1,500,000.00 sterling (One million Five Hundred Thousand Pounds) to your firm's client account on or before the 10 th March 2009 ("The Maturity Date"), upon our receiving your written request for payment and your account details on a date not before the 6 th March 2009, such payment to be made within 24 hours of our receiving your written request for payment. We hereby undertake that we shall hold the monies referred to in paragraph 1 from the date hereof in our client account to abide the undertaking here given and that we have irrevocable instructions from our client in this regard.

This undertaking is effective from the date of exchange of contracts for the purchase of the entire share capital of Stratford Edge…by Green Crown Properties Limited and a written confirmation from you of the date exchange will take place shall suffice to bring this undertaking into being and later written confirmation of actual exchange shall be given by you. In the event that we do not receive the request from you as provided for in paragraph 2 above, this undertaking shall automatically cease to be effective at midnight on The Maturity Date.'

7

This undertaking was identical, apart from the name of the recipient solicitors, to an undertaking NES had given to another firm of solicitors previously acting for Green Crown, namely Arthur Barnes, on 12 December 2008. On 19 December 2008, that firm, Arthur Barnes, had notified NES that it would no longer rely on that undertaking. Arthur Barnes was then immediately replaced by Halliwells, acting for GCF, not Green Crown, as the recipient of that undertaking. Indeed, it would appear that the decision to substitute Halliwells as the recipient of the undertaking had been made no later than 18 December, the day before Arthur Barnes' letter treating the undertaking as of no effect.

8

Both the Arthur Barnes and the Halliwells undertakings were signed by Mr Carter with the full knowledge, authority and agreement of Mr Shillingford, who had left England on 11 December 2008 on holiday and returned on 5 January 2009. Indeed, NES's offices were closed between 12 December 2008 and 5 January 2009, except for the two days when Mr Carter went in to give the undertakings, originally to Arthur Barnes on 12 December 2008 and subsequently to Halliwells on 22 December 2008. Mr Shillingford remained in telephonic and email contact with Mr Carter and Dr Hassan throughout his holiday abroad.

9

On 22 December 2008, contracts were exchanged for the purchase of the entire share capital of Stratford Edge by Green Crown Properties. On 6 March 2009, Halliwells wrote to NES requesting the payment of £1.5 million in accordance with NES's undertakings. NES was not and at no time ever had been holding funds from that client, Dr Hassan, and were not able to comply with the undertaking. On 14 April 2009, NES notified Quinn, NES's professional indemnity insurer, of the claim and sought an indemnity under NES's policy of insurance.

10

Quinn then instructed Levi Solicitors LLP ('Levi'), at their Leeds office, to investigate coverage. Michelle Levin and Megan Bartlett, whose maiden name was Peacock, now both partners in Levi, saw Mr Shillingford and Mr Carter on 12 May 2009 at Levi's London office. Megan Bartlett's attendance note sets out the version of events then given by the partners, augmented, in their evidence, by their recollection of what was said.

The Attendance Note of 12 May 2009:

11

It is to be observed that there were notable inconsistencies between the NES partners' version of events, as recorded by Mrs Levin and Mrs Bartlett in that attendance note, and the partners' subsequent statements in the claim and in this action. However, according to Michelle Levin and Megan Bartlett, whose evidence I unhesitatingly accept, Mr Shillingford confirmed that NES were being paid £5,000 on exchange of contracts and a further £10,000 on completion. That total sum of £15,000 represented 1% of the value of the undertaking of £1.5 million.

12

Whilst they had every opportunity to do so, I find that Mr Shillingford and Mr Carter did not mention, on 12 May 2009, any other work or services which they were asked to provide for Dr Hassan for that fee, apart from the giving of the undertaking. I reach this conclusion despite Mr Munro's submissions about the evidence of Michelle Levin and Megan Bartlett and about the differences which he pointed out (a) between their evidence and the notes and (b) between the manuscript note and the typed copy. There was some criticism, of Levi in general and of Michelle Levin and Megan Bartlett in particular, over Levi's alleged failure to notify Mr Shillingford and Mr Carter that Levi were no longer acting for NES at that meeting, but only for Quinn, because coverage under the policy was then under consideration, and Levi might otherwise be conflicted. On 12 May 2009, Quinn had in fact appointed separate solicitors, Crutes, to act for NES in its defence of Halliwells claim against NES.

13

In my judgment, that criticism of Levi is wholly unfounded, and, in the case of Mr Shillingford, somewhat undermines his credibility. The address, that is of...

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