Mr Richard Gabriel (Appellant/Claimant) v Mr Peter Little and Another (Respondents/Defendants) Whiteshore Associates Ltd (2ndRespondents/Defendants) BPE Solicitors (3rdRespondents/Defendants)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lord Justice Fulford,Lord Justice Maurice Kay |
| Judgment Date | 22 November 2013 |
| Neutral Citation | [2013] EWCA Civ 1513 |
| Docket Number | Case No: A3/2012/1322 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 November 2013 |
[2013] EWCA Civ 1513
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ROBERT ENGLEHART Q.C.
sitting as a deputy Judge of the High Court
HC10C02293
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Maurice Kay
Vice President of the Court of Appeal, Civil Division
Lady Justice Gloster
and
Lord Justice Fulford
Case No: A3/2012/1322
A3/2012/1318
Mr Michael Booth QC and Mr Adam Chichester-Clark (instructed by Clyde & Co LLP) for the Claimant/Appellant, Mr Richard Gabriel
Mr Patrick Green QC and Mr Matthew Bradley (instructed by Maitland Walker LLP) for the Defendants/Respondents Mr Peter Little and High Tech Limited
Mr Roger Stewart QC, (instructed by Beale and Company LLP for the Appellants/Defendants BPE Solicitors and BPE Solicitors LLP
Introduction
These appeals against the judgment of Mr Robert Englehart QC ("the judge"), sitting as a deputy judge of the Chancery Division, dated 10 May 2012 ("the judgment") arise out of a loan transaction whereby the claimant, Richard Gabriel ("Mr Gabriel"), lent the sum of £200,000 to Whiteshore Limited ("Whiteshore"), upon the terms of a facility letter dated 13 December 2007 ("the facility letter"). The loan was secured by legal charge ("the legal charge") of the same date over a property known as Building 428, Site D, Kemble Airfield Enterprise Park, Kemble, Gloucestershire, registered at HM Land Registry under title number GR 326394 ("the Property"). The facility letter provided for repayment of the sum of £200,000 to Mr Gabriel on 12 March 2009, together with an additional sum of £70,000, defined in the facility letter as "the return". This reflected a return of 35% on the sum advanced or 28% per annum. The facility letter also provided for the payment of interest at the rate of 4% per annum in the event that the loan, or the return, was not paid on the due date.
Whiteshore was a company owned as to 50% by a Mr Peter Little ("Mr Little") and his wife, and as to 50% by a Mr Andrew Smith ("Mr Smith") and his wife, and of which Mr Little and Mr Smith were directors.
Whiteshore did not repay the loan or pay the return on the due date or thereafter. Mr Gabriel exercised his rights under the charge to sell the Property but the sale realised the sum of only £13,000, which was not sufficient to meet Mr Gabriel's costs of the disposal.
When his loan was not repaid Mr Gabriel issued proceedings in the Chancery Division against (1) Mr Little, (2) Whiteshore (3) High Tech Design & Build Limited ("High Tech"), Mr Little's principal company, of which he was at all material times the owner of the entire share capital and one of its directors, the other being his son, (4) BPE Solicitors and (5) BPE Solicitors LLP (which I shall collectively refer to as "BPE", as there is no need to differentiate between the two firms), which acted on behalf of Mr Gabriel in relation to the loan transaction.
Whiteshore was established as a "special purpose vehicle" in order to implement the intended development of the Property.
In the proceedings, Mr Gabriel claimed:
i) against Whiteshore, that it was contractually liable to repay the loan; (there was no defence to this claim; Whiteshore was not represented at trial and, by that date, no longer existed as a corporate entity);
ii) against Mr Little, that he was liable to compensate Mr Gabriel in respect of his losses on the grounds:
a) that Mr Little had made fraudulent misrepresentations to Mr Gabriel as to the use to which the loan monies were to be put, which had induced Mr Gabriel to make the loan; Mr Gabriel alleged that Mr Little had fraudulently misrepresented that the loan was to be used for the development of the Property whereas, in fact, the majority of the funds were applied by Whiteshore in purchase of the Property from High Tech;
b) that Whiteshore had received the loan as a trustee under a Quistclose trust, on terms that Whiteshore would only apply the loan monies for a specific purpose, namely in development of the Property;
c) that Mr Little had dishonestly assisted in a breach of trust by Whiteshore, by procuring that Whiteshore paid the loan monies to High Tech in order to purchase the Property from High Tech, rather than applying the funds in development of the Property;
iii) against High Tech, that it was liable for the knowing receipt of trust money, which it knew had been paid to it in breach of trust or for money had and received;
iv) against BPE, that it was liable to compensate Mr Gabriel in respect of his losses on the grounds:
a) that, by Mr Richard Spencer, at the material time an assistant solicitor, and now a partner in BPE, it had been negligent in failing to exercise reasonable care and skill in the advice which it gave Mr Gabriel; and/or
b) that it had acted in breach of its fiduciary duties to Mr Gabriel and/or in breach of trust and/or dishonestly in assisting Whiteshore and/or High Tech's breach of trust by inter alia transferring the sum of £198,906.50 to Baileys, the solicitors acting for High Tech, of which £176,250 was transferred pursuant to the sale or purported sale of the Property from High Tech to Whiteshore, and the residue for a purpose unknown.
The judge's conclusions
On 10 May 2012, having heard seven days of evidence, and a half day of submissions, the judge gave judgment (i) dismissing Mr Gabriel's claim against Mr Little and High Tech, and (ii) finding BPE in breach of its duty to exercise reasonable care and skill. He awarded Mr Gabriel the sum of £191,808.44 as damages against BPE.
In relation to the claim as against Mr Little and High Tech, the judge rejected Mr Gabriel's case that Mr Little had made any fraudulent misrepresentations about the purpose for which the loan was to be applied; see paragraphs 74 and 75 of the judgment. He also rejected the proposition that the facility letter created a Quistclose or other type of trust.
In addition to rejecting the argument that any Quistclose trust had been created, the judge also rejected Mr Gabriel's case that dishonesty on the part of Mr Little had been established in relation to the payment to High Tech. Consequently he dismissed the claims against both Mr Little and High Tech on the respective grounds of dishonest assistance and knowing receipt.
In relation to the claim as against BPE:
i) in the light of his finding that there was no Quistclose or other trust, the judge dismissed Mr Gabriel's claim that BPE had any liability for acting in breach of its fiduciary duties to Mr Gabriel and/or in breach of trust and/or dishonestly in assisting Whiteshore and/or High Tech's breach of trust;
ii) the judge made it clear that there was no question of any dishonesty on the part of Mr Spencer, the relevant partner at BPE;
iii) however, in relation to the claim against BPE for failing to exercise reasonable care and skill, the judge held that BPE was indeed in breach of its duty in drawing up the facility letter and in failing to inform Mr Gabriel of the intended utilisation of the loans;
iv) whilst the judge accepted that Mr Spencer had no duty to advise Mr Gabriel as to the commercial risk inherent in the loan, he held that, nonetheless, from what Mr Spencer had learned in his capacity as Mr Gabriel's solicitor, it was Mr Spencer's duty to inform Mr Gabriel that the amount of £150,000 plus VAT, out of Mr Gabriel's £200,000 loan monies, was going to be paid to High Tech, before Whiteshore could acquire the Property; accordingly the judge held that:
"Mr Spencer should have explained to Mr Gabriel that, although the latter was advancing £200,000, his funds were going to be applied substantially for Mr Little's benefit and in reality Mr Little was not putting anything at all into the project."
See paragraphs 81–87 of the judgment.
The procedural chronology of these appeals
At the hearing on 10 May 2012, the judge gave BPE permission to appeal against his finding that it was liable in negligence for the losses which Mr Gabriel had suffered in respect of the loan. No application was made on that occasion by Mr Gabriel for permission to appeal against the judge's rejection of his claim against Mr Little and High Tech.
By notice of appeal dated 30 May 2012, Mr Gabriel applied to the Court of Appeal for permission to appeal against the judge's order dismissing his claim against Mr Little and High Tech. By his notice of appeal Mr Gabriel sought an order that the Court of Appeal should set aside the judge's order dismissing his claims against Mr Little and High Tech, order a new trial of his claims against them, or alternatively enter judgment against them in his favour. Mr Gabriel's Grounds of Appeal consisted of 18 grounds challenging both the judge's finding of facts and his conclusions of law. I shall refer to Mr Gabriel's appeal against the dismissal of his claims against Mr Little and High Tech as "the Little appeal".
By a respondent's notice dated 15 June 2012, Mr Gabriel also sought permission, if, and to the extent that, BPE's appeal against the judge's finding that it was liable in negligence for Mr Gabriel's losses were successful, to cross-appeal against the judge's refusal to hold...
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