Lucy Burnford v Automobile Association Developments Ltd
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 28 February 2022 |
| Neutral Citation | [2022] EWHC 368 (Ch) |
| Docket Number | Case No: BL-2021-000731 |
| Court | Chancery Division |
[2022] EWHC 368 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: BL-2021-000731
Andrew Thompson QC and Ben Griffiths (instructed by Reynolds Porter Chamberlain LLP) for the Applicant
Stephen Auld QC and KV Krishnaprasad (instructed by Stewarts Law LLP) for the Respondents
Hearing dates: 2 February 2022
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.
INTRODUCTION
This is my judgment on an application by the defendant by notice dated 8 October 2021 to strike out the claim or for reverse summary judgment on the claim against the claimants. The application is made in a claim whose claim form was issued on 7 May 2021, by which the five claimants claim damages against the defendant for fraudulent or negligent misrepresentation and/or for breach of contract by the defendant. The claimants claim as the former shareholders in a company called Motoriety (UK) Ltd, which was incorporated in 2013, entered into certain arrangements with the defendant in 2015, but went into administration on 5 May 2017, and was finally dissolved on 5 June 2019.
The application notice dated 8 October 2021 asks for the following order:
“An order that:
(1) the Claim (or parts thereof) be struck out under CPR rule 3.4(2)(a) or (b), alternatively the Claim or (or parts thereof) be dismissed under CPR rule 24.2; and
(2) the Claimants pay the Defendant's costs of the application and of the claim
because (1) the particulars of claim disclosed no reasonable grounds for bringing or defending the claim, alternatively (2) the particulars of claim are an abuse of the court's process, alternatively (3) the claimants have no real prospect of succeeding on the claim or issue and there is no other compelling reason why the case should be disposed of at trial.”
The evidence in support of the application is contained in a witness statement dated 8 October 2021 of Simon Goldring, who is a partner in the defendant's solicitors, together with one exhibit. The evidence in opposition consists mainly of a witness statement dated 14 December 2021 by Zachary Sananes, a partner in the claimants' solicitors, together with one exhibit. But there is also another, short witness statement dated the same day by the second claimant, which is intended to deal with a particular point in this application which arises only in relation to him.
As I have said, the claim form was issued on 7 May 2021. The particulars of claim were served on 3 June 2021. The defence was served on 27 August 2021, and a reply was served on 1 October 2021. In addition to the statements of case, a draft amended particulars of claim has also been prepared on behalf of the claimants, but as yet no application for permission to amend the particulars of claim has been made. The parties have agreed that this application should be determined on the assumption (for the purposes of this application only) that such permission would be given by the court, and that therefore the draft amended particulars of claim represent the current form of the claim being advanced.
BACKGROUND
I turn now to set out the factual background to the current proceedings and the application. I base this on the parties' statements of case (including the draft amended particulars of claim) and the written evidence filed. There was no tendering or cross-examination of any witnesses of fact. In this connection, I bear in mind what Rimer LJ (with whom Ward and Jacob LJJ agreed) said in Coyne v DRC Distribution Ltd [2008] EWCA Civ 488:
“58. As regards the need for oral evidence, Mr Ashworth reminded us that it is well-settled practice that if a court finds itself faced with conflicting statements on affidavit evidence, it is usually in no position to resolve them, and to make findings as to the disputed facts, without first having the benefit of the cross-examination of the witnesses. Nor will it ordinarily attempt to do so. The basic principle is that, until there has been such cross-examination, it is ordinarily not possible for the court to disbelieve the word of the witness in his affidavit and it will not do so. This is not an inflexible principle: it may in certain circumstances be open to the court to reject an untested piece of such evidence on the basis that it is manifestly incredible, either because it is inherently so or because it is shown to be so by other facts that are admitted or by reliable documents. Mr Ashworth referred us in support to Re Hopes (Heathrow) Ltd, Secretary of State for Trade and Industry v. Dyer and others [2001] 1 BCLC 575, at 581 to 582 (Neuberger J). He also referred us to paragraphs 17 and 18 of the judgment of Mummery LJ in Doncaster Pharmaceuticals Group Ltd and Others v. The Bolton Pharmaceutical Company 100 Ltd [2006] EWCA Civ 661, which provides a reminder of the caution the court should exercise in granting summary judgment in cases in which there are conflicts of fact which have to be resolved before judgment can be given. Mr Ashworth said that these principles apply equally to the case in which the evidence is given by witness statement rather than by affidavit, and I agree. I said as much in my summary of the principles in Long v. Farrer & Co and Farrer [2004] EWHC 1774 (Ch); [2004] BPIR 1218, at paragraphs 57 to 61.”
Motoriety (UK) Ltd
As I have said, the claimants are all former shareholders in Motoriety (UK) Ltd. The first and second claimants were founding shareholders, and were also directors. The remaining claimants acquired their shareholdings later, by investment, and were not directors. The defendant is a limited company which at the time was a subsidiary of the Automobile Association plc (“the AA”), the well-known motorists' organisation. Motoriety (UK) Ltd's business consisted in the exploitation of two software-based products for the motoring industry, designed to assist motorists in obtaining the servicing of their motor vehicles. One product created a personal motoring administrative hub and digital garage service, and was called “Automyze”. The other was for use by garages and the public, as an online garage directory and booking platform, and was known as “Garage Guide”.
The negotiations and the alleged representations
The company wished to expand its customer base, and entered into negotiations with the AA, on the basis that the AA could invest in the company and also provide access to its members as potential customers. The claimants plead that they had also entered into negotiations with at least one other potential investor, Solera Holdings Inc. However, heads of terms were agreed between the company and the AA on 18 May 2015. The claimant's case is that these heads of terms were preceded by a number of significant representations made by the defendant (as the appropriate subsidiary of the AA) to the claimants. These representations form the basis of a claim in misrepresentation.
One of them was a representation that the defendant would provide the company with immediate access to the AA's customer base of 4 million personal members and 9 million business to business customers (“the Immediate Access Representation”). The claimants plead that in making this representation the defendant impliedly represented that it honestly and reasonably believed that representation to be true (“the Honesty Representation”). The claimants further allege that, in a business plan prepared by the claimants on the basis of information provided by the defendant, the defendant represented that, over a 12 month period, approximately 5 million of the AA's customers would receive a reminder that the MOT test on their vehicle was due and that, of those, 50,000 customers a month would register to use the company's services (“the Business Plan Representations”).
The investment agreement
On 28 August 2015, the company, the claimants and the defendant entered into an investment agreement, under which (amongst other things) the defendant agreed to subscribe for 50% of the share capital of the company for £400,000, the defendant would obtain representation on the board of directors of the company, and the defendant would have a call option for the remaining 50% of the company for the consideration produced by a formula contained in the agreement, consisting of what were called the Initial Option Payment and the Earn-out Consideration. On the same day, the company granted the defendant a licence to use its software and associated intellectual property rights. This licence in schedule 1 contained a list of services for which the company and the defendant were each responsible. It is pleaded that it was identical to schedule 1 to the heads of terms of 18 May 2015. The claimants say that, in these circumstances, the defendant represented to them that it would provide the company with the services referred to in schedule 1 to the licence agreement (“the Services Representation”). (For myself, I should have thought that that, if anything, would be a promise rather than a representation, but nothing turns on that now.)
The claimants say that they entered into the investment agreement of 28 August 2015 relying on the four “representations” that I have referred to above. They also say that each of these representations was intentionally false or made with recklessness as to their truth or falsity. Alternatively, they say that each of the...
To continue reading
Request your trial
-
Karen Pegler v Timothy Bruce McDonald
...the applicable law relating to the summary dismissal of claims from a recent judgment of my own, in Burford v AA Developments Ltd [2022] EWHC 368 (Ch): “17. I turn now to consider the law. First of all, the relevant rules of procedure are CPR rule 3.4(2) and CPR rule 24.2. The former rule ......
-
Karen Pegler v Timothy Bruce McDonald
...the applicable law relating to the summary dismissal of claims from a recent judgment of my own, in Burford v AA Developments Ltd [2022] EWHC 368 (Ch): “17. I turn now to consider the law. First of all, the relevant rules of procedure are CPR rule 3.4(2) and CPR rule 24.2. The former rule ......
-
Lucy Burnford v Automobile Association Developments Ltd
...AND PROPERTY COURTS OF ENGLAND AND WALES BUSINESS LIST (ChD) His Honour Judge Paul Matthews (sitting as a Judge of the High Court) [2022] EWHC 368 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Stephen Auld KC and KV Krishnaprasad (instructed by Stewarts Law LLP) for the Andrew Thomp......
-
High Court Strikes Out Shareholders' Claim Barred By The Reflective Loss Rule
...that all the losses claimed were barred by the reflective loss principle: Burnford & Ors v Automobile Association Developments Ltd [2022] EWHC 368 (Ch). As a reminder, the Supreme Court in Sevilleja v Marex Financial Ltd [2020] UKSC 31 confirmed (by a 4-3 majority) that the reflective loss ......