Murfin v Campbell
| Jurisdiction | England & Wales |
| Judge | HH Judge Pelling |
| Judgment Date | 22 June 2011 |
| Neutral Citation | [2011] EWHC 1475 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 0 MA 30313 |
| Date | 22 June 2011 |
[2011] EWHC 1475 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
His Honour Judge Pelling QC
Sitting as a Judge of the High Court
Case No: 0 MA 30313
Mr Craig Sephton QC (instructed by Freeth Cartwright LLP) for the Claimant
Mr Scott Allen (instructed by Beachcroft LLP) for the Defendant
Hearing dates: 7 th June 2011
HH Judge Pelling QC:
Introduction
This is an application by the Defendants for summary judgment dismissing the claims that have been advanced in Paragraphs 28.1 and 29.1 of the Amended Particulars of Claim or alternatively for an Order that those paragraphs be struck out.
Background
The claim is for damages for breach of a contract of retainer by which it is alleged that the Claimant and the other directors of Club Travel 2000 Group Limited ("CTG") retained the Defendants to assist in raising investment capital in order to enable a subsidiary of CTG to satisfy the requirements of the Civil Aviation Authority in connection with the obtaining of an Air Operator's Licence. The detailed circumstances which led to this need are summarised in Paragraphs 7 to 13 of my judgment in Club Travel 2000 Holdings Limited v. Murfin (2008) 6 th November ("the Warranty Claim").
On 30 th April 2004, an agreement was entered into, known in these proceedings and the Warranty Claim as the "SPA". Under that agreement, the Claimant and others sold their respective shares in CTG to a purchaser vehicle which became Club Travel 2000 Holdings Limited ("Holdings") and which was controlled by a Mr Warr. The consideration for the shares was the issue by Holdings to the Claimant of what were called the Series A Loan Notes. The loan notes had a nominal value of £2 million but could be redeemed only if certain profit thresholds were achieved in the 2004 and 2005 accounting years. In fact those thresholds were never crossed and it is common ground between the parties before me that in consequence no sums ever became payable to the Claimant under the Series A Loan Notes.
The SPA contained a warranty by the Claimant by which he warranted to Holdings that the losses of the target company in the period 1 st January to 30 th April 2004 did not exceed £1.1 million. The losses made by the target exceeded that figure and the Warranty Claim was commenced against the claimant alleging breach of warranty amongst other allegations that it is not necessary to dwell upon further. In the Warranty Claim I found that the losses during the relevant period had been £2,034,411 and thus exceeded the warranted figure by £934,411.
Clause 2.6 of the SPA provided that:
"The whole or any amount due to the Purchaser in respect of a Settled Claim shall be set off by the Purchaser against the Series A Loan Notes whether due for payment or not in the order of redemption of the Series A Loan Notes. The Purchaser shall have a right of recovery against the Warrantor for settled Claims but only after all the Series A Loan Notes have all been repaid or cancelled following set off in accordance with this Clause 2.6. …"
"Settled claim" was defined as meaning a claim in respect of a breach of warranty which had either been agreed as fully and finally settled between the parties or one that had been determined by judgment of a court and in respect of which there was no appeal available. Whilst there was an appeal against a costs order which was compromised without a hearing there was no appeal as to the substance of my conclusions. It was common ground by the time of the trial of the Warranty Claim before me that the Series A Loan Notes would never become redeemable. I concluded that the Claimant was nevertheless entitled to set off the sums otherwise due from him to Holdings for breach of warranty (£934,411) against the nominal value of the Loan Notes. My reasoning for this conclusion is set out at Paragraphs 38 to 47 of my judgment in the Warranty Claim.
The significance of this for present purposes is this – had the Series A Loan Notes been redeemable, then the effect of my judgment is that the Claimant would have had to give credit to Holdings of up to £934,411 against the sums otherwise due under the loan notes and would have suffered a loss in that sum. However, since the Loan Notes were not redeemable the effect was that although there had been a breach of warranty there was no sum that ever became payable to Holdings because the whole of the sum otherwise due for breach of warranty fell to be set off against the nominal value of the otherwise unredeemable loan notes.
In these proceedings the Claimant alleges that he gave the warranty that I have referred to as a result of negligent advice from the Defendants. It is to be assumed for present purposes that this is so. Aside from a claim for irrecoverable costs (in respect of which there is no challenge on this application) the Claimant claims by way of damages the sum of £934,411 which is pleaded in Paragraph 28.1 of the Amended Particulars of Claim in the following terms:
"… the claimant has suffered loss and damage namely … his liability to Holdings in respect of his breach of the Losses Warranty found … to be £934,411 …"
The Parties' Submissions
Although the Defendants' case has been put in a number of different ways their essential point is that the Claimant has not suffered any loss or damage in the alleged sum even assuming all allegations made by the Claimant are resolved in his favour. Whilst it is true to say that there is a principle that damages ought to be assessed at the date of breach, that is not the invariable rule and it is a rule that will be departed from where as here the justice of the case requires it. Even if that is wrong, it is submitted that the Court would nevertheless be obliged to take account of matters after the date of breach when arriving at the actual loss suffered. Either way, it is submitted, no loss in the sum claimed has been suffered and the contrary is not sensibly or realistically arguable. On this analysis issues concerning remoteness do not arise because no relevant loss has been suffered and for similar reasons the principles concerning mitigation of loss have no application.
The Claimant's case is that " C's loss occurred when, in reliance upon D's negligent advice, he gave the Losses Warranty …" and at that time, as is common ground, the parties could not know whether the Series A Loan Notes would become redeemable or not. The set off that occurred is res inter alios acta and/or is extraneous and irrelevant in law and in the result on the factual assumption made for the purposes of this application the Claimant would be entitled to recover the sum claimed as damages for breach of contract or negligence.
Discussion
It will be necessary to consider at least some of the authorities referred to by the parties in due course. However, it is convenient to start by considering the issue free of the authorities that the parties have referred me to. This is a claim for damages for advice which it is to be assumed for present purposes was given negligently and which caused the Claimant to give the Losses Warranty when otherwise he would not have done. In those circumstances the Claimant is entitled on conventional reasoning to recover the sum of money that would as nearly as possible put him in the same position he would have been in had the actionable wrong not occurred.
It is not alleged that the Claimant would have entered into the SPA on terms that were different from those that in fact applied other than that he would not have given the warranty. It is to be assumed for present purposes that Holdings would have been willing to contract on that basis. Assuming that to be so, the only consideration that he would have received for his shares would have been the Series A Loan Notes. He would thus have received nothing for his shares in the events that have happened irrespective of whether he had given the warranty or breached it. Whilst it was uncertain what the Loan Notes were worth on 30 th April 2004, that...
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