Luffeorm Ltd v Kitsons Llp
| Jurisdiction | England & Wales |
| Judge | Mr Recorder Acton Davis |
| Judgment Date | 02 July 2015 |
| Judgment citation (vLex) | [2015] EWHC J0702-3 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 02 July 2015 |
| Docket Number | Claim No: 3BS90706 |
[2015] EWHC J0702-3
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
Mr. Recorder Acton Davis QC
SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Claim No: 3BS90706
Mr Gavin Hamilton (instructed by Lyons Davidson) for the Claimant
Mr Anthony de Freitas (instructed by Bond Dickinson) for the Defendant
Hearing dates: 23 rd and 24 th March, 2 nd July 2015
Mr Recorder Acton Davis QC:
The Highwayman's Haunt is a public house on the Old Exeter Road in Chudleigh, Devon. A public house has stood on the site since the 13 th century: the highwayman concerned was Jack Witherington who used the premises as his hide-out until he was captured on 1 st April 1691 whilst hiding in the main chimney breast of the house. I take that summary of the history of the building from the menu prepared by the Claimant at [Bundle 2/853].
In 2011 the then owners of the public house, Mr and Mrs Bowden and Mr and Mrs Elliott, offered for sale the lease on the premises for the sum of £195,000. It was a lease dated 31 st October 2005 from Greene King Brewing and Retail Limited. The leasehold term was 15 years from 31 st October 2005.
Mr and Mrs Coles had been working in India, Malaysia and Indonesia in the restaurant business. Mrs Coles told me that she has worked for approximately 30 years in the hospitality industry. Initially she ran a Devonshire beachside Inn from May 1988, then a Wine Bar in Exeter, followed by a restaurant in that city, before becoming General Manager of a resort, bar and restaurant in southern Spain in 2003 before going to the subcontinent in 2008. However she and her husband wished to return to England. They became aware that the Highwayman Haunt was on the market for sale. Mrs Coles said that this would have been their first business venture of that kind and they were attracted to the business because it had a relatively high turnover (approximately £750,000) which had been built up by the vendors over the previous five years.
The Coles' first visit to the premises was on the morning of 1 st February 2011. During that meeting they were informed by the vendors that their reason for wishing to sell was that the older couple Mr and Mrs Bowden, who ran the Bar, wished to retire and the younger couple Mr and Mrs Elliott wished to do some travelling. The division of work within the vendors was that Mr Elliott was the chef whilst Mr and Mrs Bowden were front of house.
After their first visit to the premises on the morning of the 1 st February 2011 Mr and Mrs Coles made an offer to purchase the business for £100,000 which was refused. Thereafter, they increased the offer to £130,000 on 6 th February 2011. That offer was accepted. Mr and Mrs Coles took no valuation or other advice before making the offers. When giving evidence to me, Mrs Coles struck me as an individual who was sure of her own mind and confident in her knowledge and understanding of the hospitality business.
Mrs Coles' evidence was that the Highwayman's Haunt is in a rural area. She said there was no other direct competition within a reasonable travelling distance. It may be that something depends upon the subjective meaning of the word "reasonable", but on the evidence there were, in fact, a number of public houses within a short car journey of the Highwayman's Haunt. In any event, Mrs Coles said that she and her husband believed that the vendors' clientele would remain with the business following their acquisition of the business. She also said that in paying a substantial sum for the value of the goodwill element of the business they would have a reasonable opportunity to keep the existing clientele and to also attract new clientele. Her evidence was that the price was split as to:
(i) A nominal £1.00 for the property representing the residue of the term under the lease;
(ii) £21,000 for fixtures and fittings; and
(iii) The balance of £108,999 for goodwill.
No evidence was put before me as to the negotiations in respect of the component parts of that sum. I am unable to place any reliance upon those component parts. Nevertheless I do accept that Mr and Mrs Coles hoped that they would retain most, if not all, of the existing clientele and that they would be able to attract new customers.
Next, the Coles were interviewed by Greene King for approval as assignees of the lease and other training.
The Coles incorporated the Claimant Company on 14 th February 2011 for the purpose of acquiring the business. I do not know and it does not matter whether that decision was taken on advice. In this judgment I use the "Coles" and the "Claimant" without reference to the corporate reality, as did both Counsel in argument. The Coles were in touch with their accountants Darnells who suggested to them that the Defendant firm of solicitors act on their behalf in regard to the purchase of the business. Mr Peter Boyne was the partner in that firm dealing with the matter. He says that from looking at the file he had his first telephone conversation with Jane Coles on 9 th February 2011. By then the Coles had already had their interviews with Greene King.
It was a theme of Mr Boyne's evidence that the Coles were eager to complete the sale as quickly as possible. Mrs Coles told Mr Boyne by e-mail on 23 rd March 2011 that time was of the essence and that the Coles felt "impotent". There was a meeting on 29 th March 2011 between Mr Boyne and Mr and Mrs Coles for the purpose of going through the pre-contract documentation and the results of pre-contract searches. Mr Coles left that meeting early because of his frustration at the situation. I take that to be an indication that Mr Coles was finding the process unduly cumbersome and slow.
I accept that Mr and Mrs Coles wanted the acquisition procedure dealt with as quickly as possible. Mrs Coles told me when she gave evidence that Easter, Mother's Day and the May Bank Holidays lay ahead and she wished to take advantage of those trading opportunities.
Kitsons sent the Coles a letter confirming their instruction enclosing Kitsons' terms of business [2/408 – 410]. It is clear from that letter that Kitsons' instructions were "to act on your behalf in connection with your purchase of the above leasehold business as per our telephone conversation yesterday". Thus the retainer went beyond mere conveyancing in respect of the lease. The retainer was to act in respect of the purchase of the leasehold business.
Contracts were exchanged on the 6 th April 2011 on which date the Licence to Assign was also granted. The Claimant was registered as owner of the leasehold on 20 th April 2011, completion having occurred on 6 th April 2011. The Completion Statement [2/373] shows a total purchase price of £130,000.
The Claimant ran the Highwayman's Haunt until selling the premises to Beesons (Torbay) Limited for £69,950. Exchange of contracts and completion of that sale took place on 31 st July 2012. The premises produced a poor return for the Claimant which resulted in the decision to sell the business at a price less than was paid by the Claimant.
On 27 th July 2011 one of the vendors, Mr Elliott, took over at a public house called The Claycutter's Arms in the next village some three miles away. Mr Coles says "Mr Elliott, as a chef had a loyal following in the area and many of our clientele decided to patronise The Claycutter's Arms instead of the Business. From July 2011 we saw a distinct reduction in the turnover of the Business in comparison with the turnover stated by the vendors on the sale of the Business. We saw an average of 50 covers per night compared to the 100 covers we were expecting. We were trading at a level of around £430,000 per year compared to the anticipated £740,000 to £750,000" [1/49 paragraphs 9 and 10]. Mrs Coles gives evidence to the same effect at paragraphs 17 – 20 of her witness statement [1/53].
Both Mr and Mrs Coles said that the downturn in the business (necessitating its sale at a price less than was paid for it) was caused by the competition at The Claycutter's Arms which would have been prevented if their Contract of Sale from Mr and Mrs Bowden and Mr and Mrs Elliott had included a covenant from the vendors restraining them from operating a competing public house within a radius of 5 miles for a period of 2 years and would thus have prevented the occurrence of that which caused the downfall of their business at the Highwayman's Haunt.
The core of the case against the Defendant is pleaded at paragraph 31 of the Particulars of Claim, in particular at paragraph 31.2, that the firm: "failed to advise Mr and Mrs Coles that they should ask the Sellers to give a covenant against competing with the Business"; and paragraph 31.3 "failed to advise Mr and Mrs Cotes as to the risk that the trade of the Business might be diverted, if there was no covenant by the Sellers not to compete with the Business". It is said that through and by reason of those failures the Defendants were negligent and acted in breach of contract.
By the Defence it is denied at paragraph 10 that "it fell within the scope of the duty of commercial conveyancing solicitors to advise on the business component of any transaction and save that the Claimant is required to prove that it was 'in accordance with usual commercial conveyancing practice' for a solicitor acting for a buyer
(a) to point out that there was no covenant in a draft contract profit by the Seller against competing or
(b) to advise that such a covenant should be requested…".
It is admitted at paragraph 10 of the Defence that no such advice was given.
However, Mr Boyne's witness statement says, at paragraph 16 [1/58]:
"…I ran through the terms of the Sale and Purchase Agreement with Jane Coles. I highlighted to her what was...
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