Iain Lawrie Shearer and Others v Spring Capital Ltd (First Defendant) (a) Tenon Pension Trustees Ltd and and Another (Second Defendants) (a) Tenon Pension Trustees Ltd and and Another (Third Defendants)
| Jurisdiction | England & Wales |
| Judge | Daniel Alexander,Daniel Alexander QC |
| Judgment Date | 04 November 2013 |
| Neutral Citation | [2013] EWHC 3373 (Ch) |
| Date | 04 November 2013 |
| Court | Chancery Division |
| Docket Number | Case No: HC13B00958 |
[2013] EWHC 3373 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building
Fetter Lane
London EC4
Mr Daniel Alexander QC
Sitting as a Deputy Judge of the Chancery Division
Case No: HC13B00958
Mr Edward Francis (instructed by Edwin Coe) for the Claimants
Mr James Aldridge (instructed by Harbottle& Lewis) for the Defendants
Hearing date: 29 October 2013
Approved Judgment
I direct that, pursuant to CPR PD39A 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.
Daniel Alexander QC
INTRODUCTION
I gave judgment on 17 October 2013 [2013] EWHC 3148 (Ch) in which I granted the claimants' application for an interim injunction and dismissed the first defendant's application to strike out certain paragraphs of the Details of Claim which rely on an alleged tender of the sum owing on 12 February 2013 and I refused summary judgment in respect of them.
In that judgment, I held that the claimants' pleadings were not so devoid of merit on the tender point that it would be right to strike them out at this stage and held that, in so far as they raised issues of law, those were best determined against the background of fully found facts.
I dealt with each of the arguments advanced as to why the tender was plainly invalid and explained why, in my view, they raised an arguable case. In the light of my conclusions on the tender arguments, I considered that it was appropriate for an interim injunction to be granted restraining the enforcement of certain security pending trial but held that the cross-undertaking should be fortified by appropriate security.
Issues arising out of the judgment
There are three issues arising out of that main judgment: (i) fortification of security (ii) costs and (iii) permission to appeal. These points alone took about 1/2 day to argue, partly because no skeleton or draft grounds of appeal were provided by the first defendant, necessitating more extended oral argument in court.
The parties have substantially agreed directions to trial. Given the time at which argument concluded, it made more sense to put my decision on all the disputed matters in writing.
FORTIFICATION OF THE CROSS-UNDERTAKING IN DAMAGES
The parties have agreed an order in relation to the injunction point which provides for both parties giving undertakings. In the case of the claimants, a cross-undertaking in damages is proffered on behalf of the first, second and fourth claimants.
In addition, the claimants propose that the charges over the first and second claimant's shares in the third claimant (Capital Cash Limited) would stand charged as security for the above undertaking and that the first and second claimants will forthwith enter into deeds of variation of their respective charges so to provide. The third claimant operates a money lending business with a number of retail shops in the UK and the vast majority of the third claimant's shares are owned by the first and second claimants.
The first defendant contends that this is insufficient and that it would be preferable for a charge to be granted in respect of such damages over certain Docklands property (Title No. EGL467123) which is already subject to a charge in favour of the first defendant as a result of the Standstill Agreement referred to in the main judgment. The first defendant contends, in particular, that the value of the third claimant's shares is uncertain, given the basis of valuation.
Valuation of security
Mr Thomas has raised a number of doubts about this valuation in his evidence. Moreover, the OFT appears to have indicated, in 2012, by way of a "Minded to Revoke" notice that the third claimant's consumer credit licence might be put in jeopardy, although I am told that this has not in the event happened and appropriate undertakings have been given which may make that unlikely.
Mr Shearer on the other hand has given evidence, supported by valuations from independent professionals, of the value of the shares over which security is offered. That valuation is approximately £3.7 million. One of these valuations is given by Mr Stephen Brown a Chartered Accountant and corporate partner in RSM Tenon with 25 years experience in valuation work. His letter of 27 September 2013 concludes by saying that he regards the directors' valuation of £3.694 million to be a "fair reflection of Fair Value of the Shares".
Likely damages
The claimants contend that it is for the first defendant to show, in circumstances such as these, what damage it is likely to suffer and that it is such that the security offered is likely to be insufficient. That may be right in certain cases, but the first defendant contends, with some justification, that it cannot point to specific losses at this stage because there may be investment opportunities missed during the period of the undertakings which are not possible to predict at this stage. There is, however, force in the claimants' contention that opportunities to earn better than a relatively well-secured risk-free 35% compound interest in the period between now and trial are likely to be limited.
The basic outstanding loan plus any interest pending trial is in my judgment already likely to be reasonably well secured by the combination of charges, even excluding the shares in the third claimant. Although I cannot make a definitive determination now of the value of those shares, on the basis of the evidence as a whole they are likely to provide ample security for any realistic damages which may be ordered on a cross-undertaking.
Other considerations
The claimants are concerned that a charge over the Docklands land in respect of a claim for an un-quantified sum in damages sought by the first defendant would provide an opportunity for the first defendant to put unfair pressure on the claimants should they wish to dispose of or develop that land. The first defendant denies that this would even be possible, since the land could, in any event, be sold provided that the money was held secure.
As I said in the main judgment, there is potential in this kind of case for profitable tender gaming of various kinds (some of it, possibly, afforded by the legal process itself). The history between the parties, including the considerable delay by the defendants in releasing the security in respect of the SIPPs loans, suggests that opportunities for additional security gaming involving that process should be minimised if possible.
Finally, it was said that a charge in respect of damages over the shares in the third claimants' shares would or might itself limit the ability of the claimants to proceed in the manner proposed by the first defendant in a recent letter from Harbottle and Lewis of 24 October 2013. I cannot determine whether that is so but the claimants have continued to offer security over the shares in the third claimant knowing of that proposal, so I do not think this can be a fatal objection to it.
Conclusion on fortification of cross-undertaking
All of these considerations suggest that, for the time being at least, the claimants' proposal for fortification provides sufficient security. That is re-inforced by the fact that the order provides for either side to apply to court for variation of the respective undertakings inter alia to adjust the security.
I therefore accept the claimants' proposed undertakings and invite the parties to draw up orders reflecting this judgment and the small amendments to the draft directions discussed in court.
COSTS
I indicated in the main judgment that I thought that the appropriate order was for the costs of these applications to be costs in the case. The claimants contend that this would be wrong and say that they should have all of their costs. The first defendant contends that costs in the case would be the right order.
CPR Rule 44.2 provides:
(1) The court has discretion as to –
(a) whether costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to be paid.
(2) If the court decides to make an order about costs –
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.
The claimants refer to Berezovsky v. Abramovich [2011] EWCA Civ 153 and, as to costs, [2011] EWCA Civ 484 where the Court of Appeal re-affirmed the general rule that where a party loses a strike out application as a matter of principle it should pay the other side's costs. The applications in that case lasted several days, although both Sir Antony Colman and the Court of Appeal decided it should proceed to trial. The Court of Appeal referred to the discretion of the court when it came to costs being "ample".
In my judgment, this is a case in which the general approach should be the starting point but that it should not, especially in the light of CPR rule 44(2)(b), operate as a straightjacket. In this case, there are particular reasons for some departure from the general approach to reflect the nature, degree and circumstances of the claimants' success. They are as follows.
First, in this case there is likely to be a very significant overlap between the evidence to be given at trial and the evidence...
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