Martin Richard Walsh and Others (Claimants/Appellants) v Needleman Treon (A Firm)and Others (Defendant/Respondent to Appeal (Fourth Defendant only)
| Jurisdiction | England & Wales |
| Judge | Me Justice Barling |
| Judgment Date | 25 July 2014 |
| Neutral Citation | [2014] EWHC 2554 (Ch) |
| Court | Chancery Division |
| Date | 25 July 2014 |
| Docket Number | Case No: HC12C00639 |
[2014] EWHC 2554 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Barling
Case No: HC12C00639
Ms Teresa Rosen Peacocke (instructed by Hugh Cartwright & Amin) for the Appellants
Mr Scott Allen (instructed by Bond Dickinson LLP) for the Respondent
Hearing dates: 10 and 11 June 2014
Introduction
By a judgment dated 17 November 2013 Deputy Master Rhys ("the Judge") granted the Respondent's ("Mr Prior") application for summary judgment against the Appellants under CPR 24.2(a)(i). The issue before the Judge was whether the Claimants' pleaded case that Mr Prior was a partner as opposed to an employee in the First Defendant, a firm of solicitors ("the Firm"), had a real prospect of success at trial. The Judge also determined a second issue, not currently the subject of any pleading but argued out at the hearing before him, namely whether there was a real prospect of the Claimants succeeding at trial on an alternative claim that Mr Prior held himself out, or knowingly allowed himself to be held out, as a partner in the Firm, so as to be liable to the Claimants pursuant to section 14 of the Partnership Act 1890 ("s.14"). The Judge decided both points in favour of Mr Prior, and refused permission to appeal. By an order dated 14 April 2014 Hildyard J ordered the renewed application for permission to be heard by a High Court Judge with the hearing of the appeal (subject to permission) to follow. Those are the matters before me.
Procedural background
The Second and Third Defendants ("Mr N" and "Mr T" respectively) were at the material times equity partners in the Firm. Mr Prior maintains that he was never such a partner, and that he was at all times an employee of the Firm, albeit a "salaried partner" and head of the Firm's property department from the time of his joining in October 2008 until about August/September 2009 when he resigned as a salaried partner, continuing to work in the Firm until January 2010.
In the proceedings the Claimants seek damages and restitution (amongst other relief) against the Defendants on the basis of alleged breaches of contract, trust and duty between about 2006 and January 2011, when the Solicitors' Regulation Authority formally intervened in the practice of the Firm following an investigation which had been commenced in autumn 2009. The claim is based on an alleged agreement in October 2005 between the Claimants on the one hand, and the Firm, Mr N and Mr T on the other, pursuant to which the Firm was to act for the Claimants in relation to short term bridging finance transactions. The proposed transactions would be evaluated and arranged by the Firm, who would hold on trust the funds provided by the Claimants for this purpose. The Claimants would be protected by legal charges over the properties in respect of which the loans were provided, and would receive a guaranteed fixed return on the funds so invested. The Claimants allege that pursuant to this agreement they provided funds to the Firm which have not been repaid, in circumstances which render the Firm, Mr N, Mr T and Mr Prior liable to the Claimants.
The claim has a somewhat complex history. Originally a series of claims (at least 18 and possibly more) were issued in the Northampton County Court Money Claims Centre in the name of the Fifth Claimant alone. Mr Prior was not joined as a defendant at that stage. Default judgments were entered in those claims. An issue then apparently arose as to whether the Fifth Claimant was the appropriate claimant for some of the claims. A case management conference eventually took place on 7 February 2012 in Central London County Court, as a result of which 18 actions were consolidated into a single action which was transferred to the Chancery Division, permission was granted for four new claimants to be added, and for Mr Prior to be joined as an additional defendant. Amended particulars of claim and an amended claim form, together with the order of 7 February 2012, were ordered to be served on the Defendants by 21 February 2012.
It is common ground that that requirement was not complied with so far as Mr Prior is concerned, in that he was not served with the documents by 21 February 2012. They were delivered to him on about 11 April 2012. The Claimants thereafter issued an application to serve out of time, whilst maintaining that Mr Prior was in breach of the CPR by failing to acknowledge service following delivery on 11 April. The Claimants' application has not been dealt with, Mr Prior having in the meantime issued the application for summary judgment which the court decided to determine first.
Procedural wrangling about this has occupied considerable column inches in the various skeleton arguments, and looked as though it was going to spill over into this appeal. Ms Peacocke, who appeared for the Claimants, was inclined to argue that Mr Prior was not entitled to issue an application for summary judgment before he had acknowledged service. In the event this issue went away. Mr Allen, who appeared for Mr Prior, drew attention to the notes to Part 24 CPR which, at 24.4.3, make clear that a defendant (cf a claimant) can apply for summary judgment in his favour on the claim at any time after the proceedings have been commenced, and does not need to file an acknowledgment of service before doing so. This seems eminently sensible. There remains the somewhat sterile question whether Mr Prior can be in breach of the rules by failing to acknowledge service before the Claimants have obtained permission to serve him out of time. No-one suggested that I need to resolve this conundrum, and I do not propose to do so.
There is another issue: it relates to two items of new material which were not before the Judge and which the Claimants sought to introduce in this appeal. Mr Allen objected to the introduction of this material relying on the well-known Ladd v Marshall principles, as since interpreted by the courts in the light of the introduction of the CPR. I indicated at the outset that I would not decide the admissibility issue before hearing argument generally, and the hearing was conducted on the assumption that the material in question would be admitted de bene esse, each side reserving its position. I will refer to this new material in due course.
Factual background
In order to understand the parties' submissions it is necessary to set out in a little more detail the factual material which was before the Judge.
The Firm commenced practice in 1996 with Mr N and Mr T as the only partners. In 2003 the First Claimant's partner, Mrs Suzan Walsh, ("Mrs Walsh") began working there as a litigation assistant. She continued to work at the Firm throughout Mr Prior's time there. The First Claimant ("Mr Walsh") apparently lives in Thailand, and owns and/or controls the other Claimants, which are incorporated variously in Panama or the Cayman Islands.
I have already outlined the Claimants' pleaded case based on an agreement in 2005. It is alleged by the Claimants in the amended particulars of claim that pursuant to that agreement, in reliance upon representations from Mr N and Mr T as to how the monies were to be applied, the Second Claimant on 17 October 2005 advanced £750,000 to the Firm to be available for a 24 month period as bridging finance for clients of the Firm. It is alleged that Mr N and Mr T then sought additional funding from Mr Walsh, and further sums were advanced as follows: £75,000 on 20 November 2007; £110,000 on 19 November 2007; and £75,000 on 8 February 2008.
These funds were alleged to have been 'rolled over' between 2007 and 2010. It is not entirely clear whether this means that the loans were extended, or were used for new transactions, or a combination of the two: in paragraph 14 of the amended particulars of claim it is alleged that the fund was rolled over "as [the Firm] indicated that there were more bridging finance transactions to be arranged", in paragraph 17 the pleading states that "It was asserted by [Mr N] and/or [Mr T] at various times over the years that the [Firm] had had difficulties in recovering the money from borrowers, and extensions of the agreed term were sought and accepted several times." The pleading implies that at some point in 2010, probably in the first half of the year, Mr Walsh abandoned the "rolling over" and, where he had the necessary information, sought to get his money back from individual borrowers. Later, in August of that year, he caused the Fifth Claimant to begin in the county court the precursor claims to these proceedings, as already described.
The pleading makes no specific complaint against Mr Prior. The sole reference to him is at paragraph 3, where it is alleged that the Firm "was a firm of solicitors comprising Andrew Needleman (3/6/96 to 2/11)…, Saroop Treon (3/6/96 to 26/7/10)…… and Clive Prior (from 20/10/08 to 4/9/09)…." Thus, he is being sued purely on the ground that he was a partner in the Firm at material times.
In order to see the circumstances of Mr Prior's engagement in 2008 it is appropriate to quote verbatim from some of the documents which were before the Judge.
The first is a letter of 10 July 2008 from the Firm to Mr Prior.
"Dear Clive,
I refer to our further meeting last week and I am delighted to offer you a position as an Assistant Solicitor with this firm. I will shortly let you have the terms and conditions of your employment with us, but I would like...
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Formation and Expansion
...32 Lindley & Banks on Partnership (Sweet & Maxwell, 19th edn, 2010). 33 Walsh and others v Needleman Treon (A Firm) and others [2014] EWHC 2554 (Ch). Formation and Expansion 21 another , 34 in which the courts held that the traditionally understood position of partners was ‘common ground’ a......
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Table of Cases
...Vodafone Cellular Ltd v Shaw (1997) 69 TC 376, [1997] STC 734, CA 198 xxiv Partnership and LLP Law Walsh v Needleman Treon (A Firm) [2014] EWHC 2554 (Ch) 20 Wanklyn v Wilson (1887) 35 Ch D 180, 56 LJ Ch 209, 35 WR 332, ChD 137 Waterer v Waterer (1872–73) 15 Eq 402, 21 WR 508, Ct of Eq 50, 5......