Moore (D. W.) & Company Ltd v Ferrier

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE KERR,LORD JUSTICE NEILL,LORD JUSTICE BINGHAM
Judgment Date29 Jul 1987
Judgment citation (vLex)[1987] EWCA Civ J0729-12
Docket Number87/0817

[1987] EWCA Civ J0729-12

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

KING'S LYNN DISTRICT REGISTRY

(MR. R.M. STEWART Q.C., SITTING AS A

DEPUTY JUDGE OF THE HIGH COURT)

Royal Courts of Justice

Before:

Lord Justice Kerr

Lord Justice Neill

and

Lord Justice Bingham

87/0817

1985 M. No.124

Between:
D.w. Moore & Co.. Ltd.
First Plaintiffs (Appellants)
David William Moore
Second Plaintiff (Appellant)
Margaret Jean Moore (Married Woman)
Third Plaintiff (Appellant)
and
Donald Charles Campbll Ferrier
Michael Kenrick Crofts Morgan
Benjamin Page Pearson
Anthony Robert Ellis
Peter Paul Hayes
Defendants (Respondents)
Martyn Royall

MR. RICHARD SEYMOUR (instructed by Messrs. Gouldens, Solicitors, London, WC2A 1JJ. agents for Messrs. Hill & Perks, Solicitors, Norwich, NR1 4DX) appeared on behalf of the Plaintiffs (Appellants).

MR. TIMOTHY SALOMAN (instructed by Messrs. Lovell, White & King, Solicitors, London EC1A 2DY) appeared on behalf of the Defendants (Respondents).

LORD JUSTICE KERR
1

I have asked Lord Justice Neill to give the first judgment.

LORD JUSTICE NEILL
2

This is an appeal by the appellants from the judgment of Mr. R.M. Stewart Q.C., sitting as a Deputy Judge of the High Court, given on 23rd July 1986 following the trial of a preliminary issue.

3

By his judgment the judge held that the appellants' claims against the respondents were barred by the provisions of the Limitation Act 1980. The writ in the action was issued on 16th April 1985. The endorsement on the writ was in these terms:

"The plaintiffs' claim is for damages for loss suffered by the plaintiffs and each of them arising from the negligence of the defendants when acting as the plaintiffs' solicitors between 1971 and 1975, the damage being suffered in and after December 1980."

4

The statement of claim was served on 6th June 1985. On 1st August 1985 the respondents served their defence. Among other defences they averred that the appellants' claims in tort were in any event time-barred under section 2 of the Limitation Act 1980, in that the causes of action in respect of the two acts of negligence relied upon had occurred in 1971 and 1975 respectively and had therefore occurred more than six years before the issue of the writ.

5

The parties agreed to the trial of a preliminary issue. On 3rd March 1986 an order was made by consent in the following terms:

"(1) That the issue whether or not all or any of the Plaintiffs' claims in the Writ of Summons and in Paragraphs 8 and 9 of the Statement of Claim (relating to the Agreement dated 1st July 1971) and in Paragraphs 11–17 of the Statement of Claim (relating to the Agreement dated 20th May 1975) are defeated by the Limitation Acts be tried as a preliminary issue and point of law in the Action;

(2) That the said issue….. be tried on the pleadings, together with a bundle of documents comprising"—

6

and then it refers to the two agreements.

7

For the purpose of the trial of the issue, and indeed for the purpose of this appeal, it is therefore to be assumed that the allegations of the appellants set out in the statement of claim are well founded, and it is on this basis that I come to deal as far as is necessary with the relevant facts.

8

The appellant company carries on business at King's Lynn in Norfolk as, among other things, Insurance Brokers. Mr. Moore, the second appellant, is the chairman and acting managing director of the appellant company; he also holds 50% of shares. Mrs. Moore, the third appellant, who is the wife of Mr. Moore, is also a director of, and a shareholder in, the appellant company. In about March 1971 a Mr. David Fenton approached the appellants asking whether he might become a shareholder in the appellant company with a view to becoming a director and an employee. The appellants agreed to this proposal in principle, but Mr. and Mrs. Moore required it to be made a term of any agreement whereby Mr. Fenton acquired shares in the appellant company that in the event of his ceasing to be a director and/or an employee he would not for a period engage in the business of insurance, or insurance broking, within a reasonable distance of King's Lynn, or canvass or accept as clients clients of the appellant company. It was in these circumstances that in March 1971 the appellants, acting through Mr. Moore, retained the first five respondents, who were then in practice in King's Lynn together with a Mr. Newnes to advise them about the proposed transaction and to prepare the necessary documents. A form of agreement was drawn up; it was duly executed by Mr. and Mrs. Moore and by Mr. Fenton on 1st July 1971.

9

The agreement provided, inter alia, that Mr. Fenton should buy two shares in the appellant company at the price of £1 each, these shares at that stage representing one third of the issued share capital, and that Mr. Fenton should become a director of the appellant company. In addition provision was made for the sharing of the net profits by way of directors' fees. The only important clause so far as the present action is concerned, however, was clause 5 of the 1971 agreement, which was in these terms:

"The parties hereto mutually agree further that in the event of any of the parties hereto ceasing to be a member of the (Appellant) company such person shall not engage in any other business connected with insurance or insurance broking in any way whatever within a radius of fifteen miles of King's Lynn for a period of three years from the date of such person ceasing to be a member of the Company and in particular but without prejudice to the generality of the foregoing shall not canvass the Company's clients or trade connection in any way whatever".

10

According to the statement of claim the appellants sought advice from the first five respondents about the adequacy of this clause. They were told by Mr. Pearson, the third respondent, that a covenant in the form of clause 5 was (I quote from the statement of claim):

"a valid and binding covenant and sufficient in law to prevent inter alios the said Fenton from engaging, for a period of three years from the date of his ceasing to be a director of and/or employed by the (appellant company) in the business of insurance or insurance broking within fifteen miles of King's Lynn or from canvassing or accepting during such period as clients clients of the (appellant company)".

11

Time passed. In about May 1975 Mr. Fenton expressed a wish to increase his shareholding in the appellant company to 49%, This was something which had been contemplated in clause 4 (b) of the July 1971 Agreement. Once again the appellants sought the help of solicitors to advise and to prepare the documents. By now all six of the respondents were practising together under the style of Hawkins, Ferrier and Co. The first appellant asked Mr. Pearson whether they could rely on the covenant in clause 5 of the July 1971 agreement if disputes arose between Mr. Moore and Mr. Fenton, and Mr. Pearson assured him that they could.

12

A further agreement was then prepared; that agreement was executed on 20th May 1975 by Mr. and Mrs. Moore and by Mr. Fenton. This further agreement, the May 1975 Agreement, contained provisions relating to the issue of the unissued share capital of the appellant company, and for the issue to Mr. Fenton of sufficient shares to bring his shareholding up to 49% of the share capital. In addition there were other provisions, to which I need not refer.

13

I should however refer to clause 6, which was in almost identical terms to those of clause 5 in the July 1971 Agreement. It did, however, contain in addition to what was set out in clause 5 of the earlier agreement, a provision that the parties would not canvass or accept the company's clients or trade connections in any way whatever.

14

A further period of over 5 years then elapsed. In about December 1980, however, Mr. Fenton decided that he wished to cease to be a director or employee of the appellant company, and wanted instead to establish himself in business as an Insurance Broker at Swaffham, which is in Norfolk and is less than 15 miles from King's Lynn, Mr. Fenton also wanted for his new business to canvass and accept as clients persons who had been clients of the appellant company. It was then discovered by the appellants that the two clauses in the July 1971 and the May 1975 Agreements—clauses 5 and 6 respectively—did not give them the protection which they had sought and which they thought they had obtained. In particular it became clear that the provisions of the two clauses did not take effect on Mr. Fenton's ceasing to be a director or an employee, but only upon his ceasing to be a member, or shareholder, of the appellant company. As a result, so it is alleged in the statement of claim, the appellants had to conduct their negotiations with Mr. Fenton from a position of weakness, and in the end they had to sever their connection with him by way of an agreement dated 20th February 1981, which gave him the right to set up in business at Swaffham and also allowed him to act for a large number of persons who had previously been clients of the appellant company. In the present proceedings the appellants claim damages assessed on the basis of lost commissions amounting to £228,459.

15

The trial of the preliminary issue came on for hearing on 22nd July 1986. It was contended on behalf of the appellants that the cause of action in tort against the respondents did not arise until December 1980, when Mr. Fenton decided to leave the appellant company; or, to use the formula which counsel put forward in his argument before us, "when Mr. Fenton prepared to do something which...

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