John Hall (in his own right and as assignee of 1st Class Legal (IS) Ltd) v Saunders Law Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Salter
Judgment Date27 February 2020
Neutral Citation[2020] EWHC 404 (Comm)
Docket NumberClaim No LM-2019-000155

[2020] EWHC 404 (Comm)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

LONDON CIRCUIT COMMERCIAL COURT (QBD)

Royal Courts of Justice. Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

Mr Richard Salter QC

Sitting as a Deputy Judge of the High Court

Claim No LM-2019-000155

Between:
John Hall (in his own right and as assignee of 1st Class Legal (IS) Limited)
Claimant
and
(1) Saunders Law Limited
(2) Subir Kumar Karmakar
(3) Saunders & Partners LLP
Defendants

Mr Paul Mitchell QC (instructed by Knights Plc) appeared for the Claimant

Mr Daniel Shapiro QC and Mr James Sharpe (instructed by DAC Beachcroft LLP) appeared for the Defendants

Hearing dates: 12, 13 February 2020

Approved Judgment

I direct that pursuant to CPR PD 39A 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.

Mr Salter QC:

Introduction

1

This dispute concerns the extent of the duties (if any) owed by solicitors who conduct funded litigation to those who provide the litigation funding. The claimant in this action, Mr John Hall (“Mr Hall”), sues in his own right and as assignee of 1 st Class Legal (IS) Ltd, a litigation funder that is now in liquidation. The second defendant, Mr Subir Kumar Karmakar (“Mr Karmakar”), is a solicitor of the Senior Courts. The first and third defendants are firms of solicitors of which Mr Karmakar was a partner or member at various material times. In this judgment, I shall refer to 1 st Class Legal (IS) Ltd as “the Funder”, to the first and third defendants as “Saunders” and to the defendants together as “the Solicitors”. For the purposes of this application, it has been agreed that I should assume that the assignment from the Funder to Mr Hall is valid and should make no distinction between the first and third defendants.

2

In very broad outline, the complaint made in this action is that the Solicitors did not communicate to the Funder various pessimistic views expressed by counsel as to the prospects of success of the action being funded. It is said on behalf of Mr Hall that those omissions were a breach of the tripartite funding agreement between the Funder, Saunders and Malicorp Limited (“Malicorp”), the claimant in the funded action. I shall refer to that agreement, as it is referred to in the Particulars of Claim, as “the Saunders Funding Agreement”. Mr Hall also asserts that those omissions were a breach of a common law duty of care and/or of a fiduciary duty owed by the Solicitors to the Funder. Finally, Mr Hall alleges that those omissions were each the result of a conscious decision made by Mr Karmakar personally, as a result of which Mr Hall has (he says) a claim against Mr Karmakar in the tort of deceit.

3

The Solicitors now apply for the action to be summarily dismissed, relying both on CPR part 24 and upon the court's powers under CPR part 3.4(2) to strike out a statement of case. Again in very broad outline, the Solicitors' case is that that the claim for breach of contract is bound to fail because, on the true interpretation of the Saunders Funding Agreement, the Solicitors were themselves under no duty to pass on to the Funder the pessimistic views of counsel about the action's prospects of success. Any such duty was owed only by their client, Malicorp. The Solicitors also say that, in the absence of any such contractual duty to the Funder, they can be under no equivalent tortious or fiduciary duty. The Solicitors therefore say that the claim against them, whether based on contract, tort or fiduciary duty, is misconceived in law. As for the action in deceit against Mr Karmakar personally, the Solicitors say that that too is bound to fail, as it is not based upon any positive statement but only upon a pure omission to speak. They also make various complaints about what they say is the failure of Mr Hall's advisers to plead such a serious allegation properly and specifically in the Particulars of Claim.

4

The Solicitors' application was issued on 27 September 2019. It was supported by two witness statements: the first witness statement of Mr Jack Holling, a senior associate in the firm of solicitors acting for the Solicitors, which was made on 26 September 2019; and the first witness statement of Mr Karmakar made on 27 September 2019. Mr Hall's response to the application is supported by the first witness statement of Ms Melissa Worth, who is a partner in the solicitors acting for Mr Hall. Ms Worth's witness statement was made on 25 November 2019. It was answered by a second witness statement made by Mr Holling on 10 December 2019. At the hearing before me, the Solicitors were represented by Mr Daniel Shapiro QC and Mr James Sharpe. Mr Hall was represented by Mr Paul Mitchell QC. I am grateful to all counsel and to the teams behind them for their assistance.

Background facts

5

At least for the purposes of this application, the essential background facts were not in dispute:

5.1 On 4 November 2000 Malicorp entered into a contract (“the Concession Contract”) with the government of the Arab Republic of Egypt (“Egypt”) to design and construct a new airport at Ras Sudr and thereafter to operate that airport for 41 years. On 12 August 2001, Egypt purported to cancel the Concession Contract.

5.2 In April 2004, Malicorp began arbitration proceedings against Egypt in the Cairo Regional Centre for International Commercial Arbitration. In due course, a three-person tribunal was constituted, consisting of an arbitrator appointed by Malicorp, an arbitrator appointed by Egypt, and a tribunal chairman. On 19 February 2006 the Judicial Administrative Court of the Egyptian Council State set aside the arbitration clause in the Concession Contract and ordered the suspension of the Arbitration. The tribunal member appointed by Egypt then resigned. The remaining tribunal members nevertheless issued an award (“the Award”) dated 7 March 2006, in which (while rejecting Malicorp' claim for breach of the Concession Contract) they awarded Malicorp USD 14,773,497 by way of damages, interest, costs and expenses under Article 142 of the Egyptian Civil Code.

5.3 Malicorp thereafter attempted to enforce the Award in France. That attempt was unsuccessful, as were further arbitral proceedings brought by Malicorp in the International Centre for the Settlement of Investment Disputes, in which Malicorp sought to allege that the cancellation of the Concession Contract by Egypt was state expropriation.

5.4 In about February 2011, Malicorp then instructed Balsara & Co Ltd (“Balsara”) to act for it in proceedings which Malicorp proposed to bring to enforce the Award in England. Balsara was a firm of solicitors in which Mr Karmakar had the equivalent status to a “partner”, and he was the person who had primary responsibility for the Malicorp file.

5.5 Balsara helped Malicorp to apply for litigation funding and after the event insurance in connection with these proposed proceedings. On 5 August 2011, Balsara and Malicorp jointly submitted an “ATE Insurance and Litigation Funding Proposal Form” (“the Proposal Form”) to the Funder. The Proposal Form was signed by Mr Towey, a director of Malicorp and by Mr Karmakar on behalf of Balsara.

5.6 The introduction to the Proposal Form stated:

The solicitor, in conjunction with the client, should complete this form. All material facts need to [be] disclosed .. Failure to disclose a material fact may invalidate any subsequent insurance/funding agreement .. Once completed the form should be checked for accuracy and signed by both solicitor and client

Under the heading “Insurance & Funding”, the Proposal Form stated:

Funding is only available for actions where a financial remedy is sought, and where prospects of success are at least 60–65% ..

Under the heading “Please state your views as to the prospects of success”, the box labelled “70%” was marked with a cross. In the Declaration box immediately above the signatures, the Proposal Form stated that:

I/We declare and affirm that all information provided by the proposer and the legal representative in this proposal form is true and correct to the best of our knowledge and belief and that no material facts or information had been withheld

5.7 On 11 November 2011, the Funder, Malicorp and Balsara entered into an agreement (“the Balsara Funding Agreement”) under which the Funder agreed to provide funding to Malicorp for the proposed action.

5.8 On about 15 November 2011 the Funder, on behalf of Gable Insurance AG (“Gable”), issued a Litigation Costs Insurance Policy (“the ATE Policy”) to Malicorp. Subject to the Policy Wording, the ATE Policy provided an indemnity to Malicorp up to a limit of £350,000 against any failure to recover the amount of its own legal costs in the proposed proceedings and against any liability to pay Egypt's costs. On 16 December 2011, Gable (acting through the Funder) issued a Policy Endorsement increasing the total cover under the policy to £1,476,200.

5.9 The Policy Wording of the ATE Policy included (inter alia) the following provisions:

1. Compliance

(a) The due observance and fulfilment of the terms and conditions of this Policy insofar as they relate to anything to be done or complied with by the Insured and the Legal Representative and the truth of the Insured's statements and answers made or given that the time of entering into the agreement to include but not limited to the Insurance Proposal Form with the Insurer and which may subsequently be included in a statement of truth shall be conditions precedent to any liability of the Insurer to make payment under the Policy.

(b) The Insured and the Legal Representative shall conduct the Proceedings with due care and diligence and shall take all reasonable steps to minimise or avoid the costs and expenses payable under the Policy ..

..

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