Nationwide Building Society v Lewis and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE EVANS,LORD JUSTICE PETER GIBSON,SIR CHRISTOPHER SLADE |
| Judgment Date | 24 February 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J0224-16 |
| Docket Number | CHANF 97/0808 CMS3 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 February 1998 |
[1998] EWCA Civ J0224-16
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE RIMER)
Royal Courts of Justice
Strand
London W2A 2LL
Lord Justice Evans
Lord Justice Peter Gibson
Sir Christopher Slade
CHANF 97/0808 CMS3
MR RUPERT JACKSON QC and MR PAUL PARKER (instructed by Messrs Reynolds Porter chamberlain, London WClV 7HA) appeared on behalf of the Appellant (Second Defendant).
MR NICHOLAS PATTEN QC and MR TIMOTHY HIGGINSON (instructed by the litigation solicitor of Nationwide Building Society, Swindon) appeared on behalf of the Respondent (Plaintiff).
Lord Justice Peter Gibson will give the first judgment.
This appeal gives rise to a point of some interest and importance in partnership law. Can a salaried partner, who is in truth only an employee of a firm and allows his name to go on the firm's notepaper in a way which does not differentiate between him and the true principal or partners and so is held out to be a partner in that firm, be held liable to another, who has dealt with that firm, for the negligence or breach of contract by it in the absence of direct evidence of actual reliance by that other on the holding out?
The first defendant, Brian Lewis, and the second defendant, Alyn Williams, are solicitors. In July 1990 Mr Lewis was practising on his own under the name of Brian Lewis & Co. It is convenient to call Brian Lewis & Co "the firm" even though Mr Lewis was at all times its sole principal. Mr Williams accepted an invitation from Mr Lewis to join him as a salaried partner in July 1990 and he worked in that capacity until 23rd August 1991 when he left the firm. In that period his name appeared on the firm's writing paper. The paper was headed "Brian Lewis and Company Solicitors". Then the names of Mr Lewis and Mr Williams with their degrees were printed side by side.
In April 1991 one Philip Cliff applied to the plaintiff for a mortgage loan. In the application form against "Name and address of your solicitor" he wrote "B Lewis & Co" and gave the firm's address and against "Contact" he wrote "Mr B Lewis".
On 8th May 1991 the plaintiff decided to retain the firm to act for it as well. In all its subsequent communications with Mr Cliff the plaintiff's practice was to refer not only to the reference number given to Mr Cliff but also to the solicitor acting for him, and so the name of the firm was typed and "Ref: Mr B Lewis" also appeared in every letter.
In its offer of an advance, which was addressed to Mr Cliff, it referred several times to "the solicitor" and what "the solicitor" had to do. In a printed document headed "Instructions to solicitors" but completed in type and addressed to the firm, again with the words "Ref: Mr B Lewis", it asked the firm to investigate the title and prepare the necessary deeds. Both in print and in type reference was made to "the solicitor". Those instructions were received by the firm on 9th May. On 10th May the firm replied on its headed writing paper and gave its reference as "BL/AW/GMK Cliff l6339" and in the body of the letter the plaintiff was thanked for its instructions. The letter continued:
"We accordingly enclose Report on Title in the above matter and await hearing from you."The letter was signed "Brian Lewis & Co". The report on title on the plaintiff's printed form was signed in the same way. The report given was unqualified.
The letter and report were received by the plaintiff on 13th May. Subsequent communications in May from the plaintiff to the firm used different formats. A variation of the mortgage offer on an unspecified date in May was addressed to the firm, "Re Mr B Lewis". A more personal letter on 2lst May 1991 from the plaintiff's sales support administrator was addressed to "Brian Lewis Solicitors", but commenced with the words "Dear Sir". Also a letter on 24th May from the customer adviser was addressed to "B Lewis & Co" and commenced "Dear Sir". Neither gave the firm's reference which had appeared in the letter of 10th May.
On 24th May the plaintiff decided to go ahead with the mortgage and a cheque for the mortgage advance was sent to the firm. The internal document of the plaintiff authorising the cheque specified which documents were examined. They include the report on title but no reference was made to the letter of 10th May. The mortgage transaction was completed on 4th July 1991.
Mr Cliff fell into arrears. The mortgage security was sold by the plaintiff at a price well below the amount owed by Mr Cliff. On 25th August 1995 the plaintiff commenced proceedings in the Chancery Division against Mr Lewis and Mr Williams who were described as "formerly partners in the firm". The plaintiff alleged negligence and breach of contract on the part of the firm, amongst other things in failing to disclose to the plaintiff that there had been a simultaneous transaction entered into by Mr Cliff. The writ and the statement of claim are the first indications in the papers before us that the plaintiff had become aware of the existence of Mr Williams as connected with the firm.
Mr Lewis has been adjudicated bankrupt and the Solicitors' Indemnity Fund is not indemnifying him or supporting him in this litigation. We were told by Mr Rupert Jackson QC, appearing with Mr Parker for Mr Williams, that that is because dishonesty is alleged against Mr Lewis. Only Mr Williams has defended the action and he is backed by the Solicitors' Indemnity Fund. In his defence he denied being a partner in the firm and claimed that he was only an employee of Mr Lewis, but he admitted that he was held out as a partner of Mr Lewis by reason of the fact that his name appeared on the firm's writing paper. He denied any personal dealings with the mortgage transaction and denied liability.
That defence appears to have alerted the plaintiff to the fact that Mr Williams might not be a partner. In its reply the plaintiff averred that Mr Williams was held out to the world as a partner in the firm throughout all material times and, accordingly, was liable to the plaintiff as alleged. No act of reliance by the plaintiff on the holding out is pleaded.
Three preliminary issues were ordered to be tried:
(i) Is Mr Williams liable on the basis that he was a partner of Mr Lewis? (ii) Is Mr Williams liable on the basis that he was held out as a partner of Mr Lewis? (iii) Is Mr Williams liable on the basis that he was personally responsible for any act of omission of which the plaintiff complains in the action?
Those issues came before Mr Justice Rimer who heard evidence from Mr Williams but no oral evidence was adduced on the part of the plaintiff. In the judge's judgment on 23rd May 1997, which is now reported ( [1997] 1 W.L.R. 1181), the judge answered the first and third issues in the negative and the second in the affirmative.
The only appeal from those decisions is by Mr Williams who appeals from the judge's decision on the second issue. The judge commenced his discussion of the second issue by referring to section l4(l) of the Partnership Act 1890, which is in this form:
"Every one who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to anyone who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made."
As is said in Lindley & Banks on Partnership 17th ed. (1995) at paragraph 5-43, the doctrine that a person who holds himself out as a partner will be liable as such to all persons who rely on his representation was well established long before that Act and was in truth no more than an illustration of the general principle of estoppel by conduct. To establish liability under the section, the plaintiff must prove (a) holding out, (b) reliance thereon and (c) the consequent giving of credit to the firm.
The judge commented that in talking only in terms of giving credit section l4(1) might perhaps be viewed as expressed somewhat restrictively. But he referred to the view of the editor of Lindley & Banks at paragraph 5–52 that the expression should not be construed in a technical or restrictive sense but as describing any transaction of the firm. The judge said that he did not have to decide whether that view was correct as neither Mr Higginson, then appearing on his own for the plaintiff, nor Mr Parker, then appearing on his own for Mr Williams, argued that section l4(1) was to be construed restrictively, and Mr Parker was content to accept that the view expressed in Lindley and Banks was correct. Mr Parker also recognised that estoppels could arise in circumstances not falling within section l4(1).
The main argument before the judge was on reliance. The judge rejected the plaintiff's contention that there was no need for the plaintiff to prove that it placed reliance on Mr Williams's apparent status as a partner. He then turned to an alternative argument by the plaintiff that reliance should be presumed. The judge said that reliance might be presumed in some circumstances but there must be a factual basis justifying the presumption. He accepted that if 8th May 1991, when the plaintiff decided to retain the firm and instructed it, was the critical date, the...
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