Michael Hirtenstein and Another v Hill Dickinson LLP

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Leggatt
Judgment Date31 July 2014
Neutral Citation[2014] EWHC 2711 (Comm)
Docket NumberCase No: 2013 FOLIO 183

[2014] EWHC 2711 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Leggatt

Case No: 2013 FOLIO 183

Between:
(1) Michael Hirtenstein
(2) Il Sole Limited (a company incorporated under the laws of the Cayman Islands)
Claimant
and
Hill Dickinson LLP
Defendant

Matthew Reeve & Emily McCrea-Theaker (instructed by Clyde & Co. LLP) for the Claimants

Nigel Tozzi QC & James Leabeater (instructed by Beale & Co. Solicitors LLP) for the Defendant

Hearing dates: 16, 19–20, 23–26, 30 June & 3 July 2014

Section

Para Number

Introduction

1

Factual history

7

The Yacht

8

Mr Hirtenstein expresses interest

11

A sale falls through

13

The events of 11–16 July 2010

19

Monday 12 July 2010

21

Tuesday 13 July 2010

28

Wednesday 14 July 2010

31

Thursday 15 July 2010

44

Friday 16 July 2010

45

Subsequent events

48

The issues

49

Important background points

50

"As is, where is"

51

Desire for comfort regarding the Yacht's condition

57

Bargain price

60

Future plans

62

(1) What were Mr Hirtenstein's instructions?

63

The conflict of evidence

64

Findings

69

(2) Negligence

78

(3) Causation

84

The legal tests

85

Mr Lawson

87

Mr Candy

91

Mr Hirtenstein

95

Conclusion

98

(4) Quantum of a claim under a guarantee

99

Approach to the assessment of damages

100

Approach in this case

102

Condition of the engines

104

Other alleged breaches of warranty

109

Measure of damages—the claimants' case

113

Measure of damages – analysis

114

Repairing or upgrading?

123

Cost of repairs – Mr Smith's evidence

131

The insurance claim

137

Wasted expenditure and loss of use

142

Likely outcome of litigation

147

(5) Damages on a withdrawal basis

152

Measure of damages

153

Cost of restoring the Yacht to good condition

160

Value in good condition

161

Conclusion

172

(6) Limitation of liability

173

Conclusions

181

Mr Justice Leggatt

Introduction

1

At 14.14 (UK time 1) on 16 July 2010 the second claimant, a company newly incorporated in the Cayman Islands and beneficially owned by the first claimant, Mr Michael Hirtenstein, completed the purchase of a motor yacht which was then re-named "Il Sole" ("the Yacht"). About an hour later and 12 miles out to sea, the starboard engine of the Yacht suffered a major failure. The claimants had bought the Yacht without a survey or sea trial, but with a warranty of the Yacht's condition given by the seller, Candyscape Ltd. Mr Hirtenstein believed that the warranty was backed by a personal guarantee from Mr Christian Candy, the beneficial owner of the selling company. Mr Hirtenstein believed this because he had been told it only a few hours earlier by his solicitor, Mr James Lawson of Hill Dickinson LLP, the defendant in this action.

2

Although Mr Lawson thought that he had obtained a personal guarantee from Mr Candy which backed the warranty in the sale contract, in fact he had not. He had made a blunder. On the wording which had been agreed, such a contention was not even arguable.

3

A claim for breach of warranty was subsequently advanced by Hill Dickinson on behalf of the claimants in correspondence with the solicitors acting for the seller. However, in March 2011 Hill Dickinson received notice that Candyscape Ltd was being put into liquidation. Hill Dickinson then turned their attention to Mr Candy. They wrote him a letter dated 18 May 2011 asserting a claim against him personally under his guarantee. Mr Candy's solicitors replied on 2 June 2011 pointing out that the guarantee did not cover the warranty of the Yacht's condition included in the sale contract. Mr Lawson immediately recognised that this was correct and that the proposed claim under the guarantee was therefore fatally flawed. He explained this to Mr Hirtenstein on 8 June 2011.

4

In this action the claimants are suing Hill Dickinson for professional negligence in handling the purchase of the Yacht. They allege that Hill Dickinson negligently failed to obtain a personal guarantee under which a successful claim could have been made for loss resulting from the defective condition of the Yacht at the time of delivery. They further contend that, had Mr Hirtenstein been told that there was no such personal guarantee, he would not have proceeded with the purchase and he has thereby suffered loss.

5

Hill Dickinson admit that Mr Lawson was negligent in believing and informing Mr Hirtenstein that he had obtained a personal guarantee which covered the condition of the Yacht. But they deny that this negligence had any causative effect. Their case, in brief, is that Mr Lawson was not instructed to seek a personal guarantee and only told Mr Hirtenstein that he had got one after contracts had been exchanged and Mr Hirtenstein's company was contractually committed to buy the Yacht. They contend that there was no realistic chance that Mr Candy would have agreed to provide a personal guarantee covering the condition of the Yacht and that, if Mr Hirtenstein had been told this, he would nevertheless have gone ahead with the purchase. Hill Dickinson further deny that the claimants suffered any loss as a result of entering into the transaction and also argue that the value of a claim under any personal guarantee would have been far less than the claimants maintain.

6

The main witnesses of fact who gave evidence at the trial were Mr Hirtenstein and Mr Lawson. There was extensive and not always helpful expert evidence adduced on the subjects of: (1) the nature and scope of the damage to the Yacht; (2) the value of the Yacht; and (3) the Yacht's chartering capacity.

Factual history

7

Before addressing the issues in dispute, I will first give an outline of the relevant factual history, focusing mainly on the negotiations for the sale and purchase of the Yacht.

The Yacht

8

The Yacht is a 46.76m luxury motor yacht built by the Benetti Yard and launched in 1994. There is accommodation for 12 guests and 10 crew.

9

The Yacht was purchased in 2005 by Candyscape Ltd, a company established in the Isle of Man by Mr Christian Candy specially for that purpose, for US$12.45m, and was lavishly refurbished. Mr Candy and his brother are property developers who specialise in building and fitting out luxury residential properties to an exceptionally high standard. While owned by Candyscape Ltd, the Yacht was named "Candyscape".

10

According to researches carried out by the claimant's valuation expert, Mr Gilmour, the Yacht was offered for sale in May 2008 through yacht brokers, Edmiston & Company SAM, at an asking price of €17m. Three months later the price was reduced to €14.95m. In 2009, Mr Candy took delivery of a new yacht, "Candyscape II". In October 2009 Edmiston was advertising the Yacht for sale at an asking price of €9.95m. In April 2010, the Yacht was advertised for sale at €6.95m. These reductions in asking price were made against the background of a collapse in the market for luxury yachts following the financial crisis.

Mr Hirtenstein expresses interest

11

Mr Hirtenstein is a successful businessman who lives in New York. Over the years he had chartered luxury yachts for vacations and, through such chartering, came across the yacht brokers, Edmiston. By early 2009, he had decided to buy a luxury motor yacht for his own use (and with the aim of covering some of the running costs by chartering). He approached Edmiston to help him find a suitable boat. His main contact at Edmiston was a senior broker, Mr Christopher Cecil-Wright.

12

Mr Hirtenstein first expressed interest in the Yacht in March 2009. Subsequently:

i) In May 2009 Mr Cecil-Wright sent Mr Hirtenstein a brochure for the Yacht showing the then asking price of €12.95m, but saying that she would sell for less than €10m, perhaps even €8m. Mr Hirtenstein asked Mr Cecil-Wright to let him know "when it's down to give away status".

ii) In June 2009 Mr Hirtenstein expressed interest in buying the Yacht for US$8m (equivalent then to about €5.8m), but declined the invitation to change the number from $8m to €8m.

iii) In July 2009 Mr Hirtenstein repeated his figure of US$8m but was told that the deal number was currently €7.85m. Mr Hirtenstein decided to view the Yacht in Monaco and the viewing took place on 20 July 2009. From his emails to Mr Cecil-Wright at that time, Mr Hirtenstein was clearly very interested in the Yacht. However, prices were falling and he decided that it was in his best interests to wait.

iv) In January 2010 Mr Hirtenstein asked what had happened to the Yacht and then in March he asked about whether he could charter her. He was told that the Candy brothers had decided to keep the Yacht for their personal use and so she was not available.

v) On 21 April 2010 Mr Hirtenstein was told that the Yacht had come back on the market with a reduced asking price of €6.5m. Mr Hirtenstein made an offer of €6m, and Mr Candy said he would accept €6.25m. Mr Hirtenstein sent an email to Mr Cecil-Wright saying "getting very close" and asking a number of questions about the Yacht and her condition. He said in the email: "I think we may have finally found the right boat".

vi) Mr Cecil-Wright answered Mr Hirtenstein's questions on 26 April 2010 stating that the Yacht was in good mechanical condition and attaching a copy of the five year class survey undertaken in 2009. He also provided a proposal for Edmiston to manage the Yacht for Mr Hirtenstein and an operating budget showing estimated annual running costs of €1.115m.

vii) Given the state of the market, Mr Hirtenstein felt that prices might still fall further and did not make any...

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3 firm's commentaries
  • Commercial Court Confirms Traditional Understanding Of 'As Is Where Is' In Ship Sale And Purchase Contract
    • United Kingdom
    • Mondaq UK
    • 11 November 2014
    ...Hirtenstein & Others v. Hill Dickinson LLP [2014] EWHC 2711 (Comm) It will be recalled that in the case of Dalmare SPA v. Union Maritime Ltd (Union Power) [2012] EWHC 3537 (Comm), the Commercial Court, albeit in obiter comments, expressed the surprising and contentious view that the wor......
  • Shipping newsletter - Legalseas - November 2014
    • Australia
    • Mondaq Australia
    • 20 November 2014
    ...London associates Emma Humphries and Emma Burrage, looks at the case of Michael Hirtenstein, Il Sole Limited v Hill Dickinson LLP [2014] EWHC 2711 (Comm) and the judicial interpretation of "as is-where is" in the context of a sale of a second hand yacht, and whether these words ar......
  • Experts: The Rules, Recent Developments And Good Practices
    • United Kingdom
    • Mondaq United Kingdom
    • 13 October 2014
    ...with CPR 35, Practice Direction 35, or the overriding objective. However, recently, in Hirtenstein and Another v Hill Dickinson LLP [2014] EWHC 2711 (Comm), Leggatt J refused to attach any weight to the experts' opinions in the case because he found they were not supported by a transparent ......

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