Hill (Edwin) and Partners v First National Finance Corporation Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STUART-SMITH,LORD JUSTICE NOURSE,THE VICE-CHANCELLOR |
| Judgment Date | 22 July 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0722-2 |
| Docket Number | 88/0637 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 July 1988 |
[1988] EWCA Civ J0722-2
The Vice-Chancellor
Lord Justice Nourse
and
Lord Justice Stuart-Smith
88/0637
No. QBF/1213/87
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
(Civil Division)
(On Appeal from Mr. Justice Rose)
Royal Courts of Justice.
MR. I. JUDGE, QC and MR. R. DAVIES (instructed by Messrs. Rowe & Maw, London EC4) appeared on behalf of the Plaintiffs/Appellants.
MR. C. SMITH, QC and MR. A. ONSLOW (instructed by Titmuss Sainer & Webb, London EC4) appeared on behalf of the Defendants/ Respondents.
(As approved by the Judge)
This is an appeal from the judgment of Rose J. in which he dismissed the Plaintiffs'/Appellants' claim for damages against the Defendants/Respondents for procuring breach of a contract between the Appellants on the one hand and Leakcliff Properties Ltd. (Leakcliff) and Mr. Alan Pulver on the other.
The appellants are a firm of surveyors who for several years before 1973 had provided architectural services for their clients. Among such clients was Mr. Pulver, a solicitor and property developer. Mr. Pulver's property developments were carried out through various companies, of which Leakcliff was one. The finance for these developments was raised from the Respondents who are bankers.
In November 1973 the Respondents provided an on demand overdraft facility to enable Mr. Pulver to purchase freehold and leasehold property in Waterloo Road, which became known as Wellington House. The facility was originally made available to another of Mr. Pulver's companies, but it was switched to Leakcliff. Repayment was guaranteed by Mr. Pulver. At about the same time Mr. Pulver agreed with the Appellants that if the development of Wellington House went ahead they would be the architects who would see the development through to a conclusion. And when it was decided that Leakcliff were to be the developers, the Appellants' contract was with them, as well as with Mr. Pulver.
Shortly after the purchase of the property, the market collapsed and the Government imposed the need for office development permits (ODPs). These two events effectively put an end to the immediate prospects of developing the site. Over the next five and a half years Mr. Pulver and the Appellants struggled to put together schemes that would enable the development to go ahead. They did so against the inexorable increase in the interest due to the Respondents. It is only necessary to recite a few of the events in the history.
As a term of the loan agreement the Respondents were entitled to a charge on the properties; initially there were two such charges, one for the freeholds and one for the leaseholds. In due course the freehold reversion was purchased, the overdraft being extended to cover this and one legal charge on all the property was executed on 21st August 1976. Meanwhile an ODP had been obtained. In March 1977 planning permission for the redevelopment of the site was granted, based on the Appellants' drawings. The original loan was for a sum not exceeding £5 million, but from time to time it was extended. Mr. Pulver's attempts to raise finance from other sources to finance the development were unsuccessful. The reason for this was that since the property was already mortgaged up to the hilt and beyond, to secure the overdraft with the Respondents, no security could be offered to another financier unless the Respondents would give up their first mortgage, which understandably they were unwilling to do. Suggestions by Mr. Pulver to the Respondents that they themselves should finance the development, or "build out" to use the jargon, were rejected.
By 1979 the overdraft had reached about £9 million, mostly in accumulated interest. But the market in office property had considerably improved. The Respondents were faced with three alternatives. First they could call in the loan, which neither Leakcliff nor Mr. Pulver could begin to pay, and exercise their power of sale under the charge; this would result in a substantial loss. Secondly they could agree to finance being raised elsewhere. By about February 1979 a deal was very close with Manufacturers Hanover Trust which would have enabled the development to go ahead. Thirdly the Respondents could finance the build-out themselves out of their own cash flow. In effect this would involve further advances to Leakcliff with the prospect that at the end of the day all their outlay together with interest would be recouped. In the event the Respondents chose the third alternative; but in so doing they insisted that the Appellants should be replaced as architects by a prestigious firm. The Respondents considered that this was necessary if the development was to be successfully marketed. They insisted therefore that Mr. Pulver should dismiss the Appellants; he was reluctant to do so; but he had no alternative. Their contract was terminated about 6th March 1979. It is important to emphasise that there has never been any complaint or criticism of the Appellants' competence or skill.
In the course of an admirably clear and concise judgment the judge made the following important findings and in so doing held that four of the five necessary ingredients of the tort of wrongful interference with contract were established.
1. That there was direct interference by the Respondents with the Appellants' contract with Leakcliff. There was inducement, pressure and procuration. Mr. Pulver only dispensed with their services because the Respondents insisted that he did so.
2. That the Respondents knew that the Appellants were employed by Leakcliff under a binding contract to the end of the development and had sufficient knowledge that their conduct would interfere with that contract.
3. That the Respondents intended to bring the Appellants' contract to an end. This conclusion is challenged by the Respondents in their Cross-notice. In this connection the judge found: (a) that the Respondents had decided to finance the "build-out" by about 20th February 1979 and that it was an integral part of the decision that the Appellants should not be the architects. (b) that the Respondents knew that Mr. Pulver had no effective choice but to dismiss the Appellants; it was not just foreseeable, but an inevitable consequence of their decision.
4. That the Respondents' interference had caused damage to the Appellants. This was not in issue; if liability is established the extent of the damage remains to be determined by the Official Referee.
But he held that the Appellants failed on the last ingredient, namely that the Respondents' conduct must not have been justified. It is in relation to this conclusion that the Appellants appeal.
The judge held that the onus of proving justification was upon the Respondents. There is no dispute before us that this is correct; but nothing turns upon it.
I propose to set out in full the judgment in this matter. Mr. Justice Rose said:
"As I have indicated, the question here is: Did the defendants have an equal or superior right? This, in my judgment, is an entirely separate matter from intention. It is clear from the evidence of Mr. Rutter, to which I have just referred, that the defendants deliberately chose, for commercial reasons, not to exercise their rights under the legal charge. Mr. Dyer, too, said, 'I wouldn't have been very keen on building out with a Receiver under the mortgage because we, like Mr. Pulver, liked people working alongside us.' (Mr. Rutter and Mr. Dyer were both acting for the Respondents). And it cannot, in my judgment, be said that the defendants believed they were, or indeed gave any thought to the possibility that they might be, exercising rights equivalent to those under the legal charge. But that is not the end of the matter, for the defendants' belief about their rights does not provide the proper test.
"What is, in my judgment, material in the present case is not just that the defendants had a legal charge at the time they interfered with the plaintiffs' contract, but that they had agreed to provide Mr. Pulver with finance, subject to a first legal charge, at the very outset in November 1973. It is common ground that such a charge would give the defendants the right to sell the property and appoint a Receiver and therefore that such rights were implicit in the defendants' provision of finance from the beginning. Had the defendants not provided finance, Mr. Pulver would not have been in a position to retain the plaintiffs' services for this project. He required financial backing in order to purchase the property; and the defendants' backing came at or about the time when the property market started to collapse and only a month before the Government's embargo on office development. If the defendants had not provided finance at the time they did, it is inconceivable that others would have done so, shortly afterwards. In my view this timetable of events points at least to priority in the defendants' rights. Furthermore, both as envisaged in November 1973 and as ultimately executed, this charge was not for a specific sum. It secured all the moneys due to the defendants on the overdraft. It is not therefore apt to describe the defendants as entering into a new contract when they financed the development. They were making further advances on the basis of a security which already existed.
"In these circumstances, I am satisfied that the defendants did have equal or superior rights to those of the plaintiffs and that (to the extent that this is material) they acted reasonably to protect their interests in accordance with those rights.
"It...
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