Oxford Property Investments Ltd v Peter Lynn & Partners (A Firm)
| Jurisdiction | England & Wales |
| Judge | Ms Clare Ambrose |
| Judgment Date | 22 March 2023 |
| Neutral Citation | [2023] EWHC 624 (Comm) |
| Docket Number | Case No: LM-2022-000088 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 624 (Comm)
Ms Clare Ambrose
Sitting as a Deputy High Court Judge
Case No: LM-2022-000088
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
LONDON CIRCUIT COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Bond (instructed by DLA Piper UK LLP) for the Second Claimant
Nigel Tozzi KC (instructed by RPC LLP) for the Defendant
Hearing dates: 21 February 2023
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Wednesday 22 March 2023 at 10:30am.
Introduction
This is the hearing of a number of applications relating to claims made by the Second Claimant against the Defendant for negligence in acting as its former solicitors. The damages at stake are currently estimated as being up to £21.5 million.
The Defendant was instructed to act in the purchase of a property in Solihull called Sapphire Court (“the Property”) and damages are claimed in respect of that transaction. By its application to amend the Second Claimant now seeks to make a claim for loss of anticipated profits on the residential development of two other properties, known as Oaklands (in East Sussex) and Newbury (in Newbury).
There are three live applications before me:
a) the Defendant's application that the claim by the Second Claimant for loss of profits be summarily dismissed under CPR Part 24 (dated 26 October 2022);
b) the Second Claimant's application to amend its amended particulars of claim (dated 19 December 2022);
c) the Defendant's application for security for costs (dated 26 October 2022).
The issues in dispute are essentially whether the Second Claimant has a real prospect of success on its claims for loss of anticipated profits on the three properties, and whether security for costs should be provided by way of payment into court or a guarantee from related companies.
The procedural background
The claim was issued on 26 April 2022 by both the First Claimant (“OPI”) and the Second Claimant (“Sapphire”).
On 26 October 2022 the Defendant issued an application (together with the application for summary judgment referred to above) that the claims made by OPI be struck out under CPR Rule 3.4(2)(a), alternatively summarily dismissed under CPR Part 24.
On 11 November 2022 the First Claimant filed a notice of discontinuance of all its claims under CPR Part 38. It is common ground that OPI no longer makes any claim against the Defendant. This means that in practical terms for this hearing, the Defendant's application to strike out claims made by the First Claimant is no longer in issue since those claims are no longer pursued.
The existing claim and the amended claim
Given that a large part of the applications depended on the merits and basis of the claim (and also the amendments put forward) it is perhaps useful to outline what is claimed (including the case that Sapphire has put forward in its re-amended case following OPI's discontinuance) and the amendments put forward.
Both Claimants are property development companies. Sapphire is a wholly owned subsidiary of OPI. The managing director of both Claimants is Mr Shaun Savage.
Sapphire's case is that in 2017 and 2018 Mr Savage regularly instructed the Defendant to act for OPI or its subsidiaries on property transactions. In late 2017 OPI was introduced to the opportunity to purchase the Property. In November 2017 OPI instructed the Defendant to act for the special purpose vehicle that would be incorporated to purchase the Property. On 20 December 2017 Sapphire was set up as an SPV to purchase and develop it.
On 6 March 2018 Sapphire exchanged on a contract to purchase the Property and paid a deposit of £600,000. The completion date was set as 29 May 2018 (and subsequently deferred to 12 June 2018).
On or shortly before 12 April 2018 Sapphire (through Mr Savage) made a non-binding oral agreement in principle with another developer Mr John Downer under which it would be paid a finder's fee of £1 million plus VAT. On the pleadings there is an issue as to whether it was agreed on 12 April 2018 that a finder's fee of £1 million plus VAT would be paid on completion. However, it was accepted at the hearing that by 12 April 2018 the deal was for £600,000 to be paid on or before completion and £400,000 on or before 1 year later, and on around 9 May 2018 the two instalments were again changed to £500,000 plus VAT.
It also appears common ground that the structure of the deal was not finalised since initially it was expected that Mr Downer would use an SPV (called Streetsbrook) that would acquire OPI's shareholding in Sapphire. By around 18 April 2018 it was decided that instead of buying OPI's shareholding in Sapphire, the SPV would take a transfer from Sapphire (by novation or assignment) of its contract to purchase the Property. This transfer would take place on completion.
Sapphire's case is that the Defendant was instructed on 12 April 2018 to draft a deed of assignment or novation to document the non-binding oral agreement in principle and to negotiate to procure Mr Downer's agreement to those terms in order to give legal effect to it. In mid-April 2018 Mr Jeremiah (who was working as a consultant for the Defendant) expressly assured Mr Savage that the Defendant would carry out these instructions and Sapphire would not require development finance, and on 18 April 2018 Mr Savage instructed the Defendant to do all it could to get an early exchange and protect Sapphire's position, and to obtain a deposit in respect of the finder's fee. Mr Jeremiah assured Mr Savage that there was no need to obtain development finance and Sapphire was protected, and Sapphire relied on this assurance.
Sapphire maintains that the Defendant owed an obligation to Sapphire to ensure that it (Sapphire) was protected in its dealings with Mr Downer/ Streetsbrook by either advising it to obtain development finance in order to enable Sapphire to purchase the Property, or by procuring by the intended completion date a legally binding agreement with Mr Downer/ Streetsbrook on the same terms as the oral agreement made between Sapphire and Mr Downer. These duties went alongside its common law duty to carry out instructions with reasonable care.
It is claimed that in 2017/2018, and parallel to his plan to purchase the Property, Mr Savage was pursuing opportunities to pursue the development of the separate properties, Oaklands and Newbury, either through Sapphire or Newcos which would have been wholly owned by OPI, and that the finder's fee (of £1.2m) from the Property would have been made available to OPI and used to fund the deposits for Oaklands and Newbury which were around £350,000 and £450,000 respectively. Mr Savage had made offers through OPI for both these properties which had been accepted. Mr Savage had made Mr Jeremiah of the Defendant aware of the Oaklands opportunity during a telephone call on 17 April 2018 and of the Newbury opportunity in July 2017. Mr Savage informed Mr Jeremiah on around 16 May 2018 of his intention to pay the deposits for Oaklands and Newbury using the £1.2 million finder's fee to be received from Mr Downer's SPV.
It is alleged that Mr Savage (through OPI) had an offer accepted on
a) Oaklands on around 16 April 2018
b) Newbury on around 25 April 2018
each with a deposit to be paid by a separate Newco (i.e. the Newbury and Oaklands Newco respectively) which would be incorporated by Mr Savage prior to exchange. Mr Savage intended to pay the deposits using the sum of £1.2 million to be received from Sapphire by way of Mr Downer's finder's fee.
Sapphire alleges that on the day of completion, i.e. 12 June 2018, Sapphire did not receive the £1.2 million it was expecting. Its evidence is that Mr Downer said he would only pay a finder's fee of £500,000. Sapphire says that it was too late to find finance to purchase the Property and it had no other choice than to agree to accept the reduced finder's fee of £500,000 which was only paid on 29 November 2018.
Sapphire's case is that the Defendant negligently assured it that it would be protected in its dealings with Mr Downer/ Streetsbrook and failed timeously to advise Sapphire to obtain development finance to purchase the Property on its own behalf, alternatively by the completion date it failed to procure a legally binding agreement on the terms agreed in principle with Mr Downer or obtain security from him for the finder's fee.
Its case is that by reason of the Defendant's breach of duty Sapphire did not receive the £1.2 million it was expecting on completion, Sapphire was unable to find development finance allowing it to purchase and develop the Property on its own behalf, and lost anticipated profit of £15.1 million on the development of the Property. Alternatively, Mr Savage was unable to fund the Oaklands or Newbury Newcos to pay the deposit required and the properties went back on the market and were lost. Alternatively, it lost £500,000 as the difference in net finder's fee agreed and actually paid.
Originally OPI claimed damages on the basis that it had suffered loss of profits estimated at around £13.4 million from the anticipated development of Oaklands, and/or at £8.1 million in respect of Newbury by reason of the Defendant's breach of duty, on the basis that these developments would have been pursued...
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