Partco Group Ltd v Wragg
| Jurisdiction | England & Wales |
| Judge | Lord Justice Kay,Lord Justice Potter |
| Judgment Date | 01 May 2002 |
| Neutral Citation | [2002] EWCA Civ 594 |
| Docket Number | Case No: A2/2001/2215 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 May 2002 |
[2002] EWCA Civ 594
(Mr Justice Leveson)
The President of the Family Division
Lord Justice Potter and
Lord Justice Kay
Case No: A2/2001/2215
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Iain Milligan QC, Timothy Howe Esq and Patrick Goodall Esq (instructed by Wragge & Co, Birmingham) for the appellants
Miss Elizabeth Gloster QC and Ian Gatt QC (instructed by Clifford Chance, London) for the respondents
INTRODUCTION
These proceedings arise out of a 'friendly' take-over of the first claimant ("Partco") by the second claimant ("UGC") in June 1999 when UGC acquired the entire issued share capital of Partco for the sum of £178.9m pursuant to a public offer made on 30 April 1999 by CCF Charterhouse Finance Ltd. ("Charterhouse") on UGC's behalf and recommended by the Partco Board. The defendants ("Mr Wragg" and "Mr Scott") were at the time of the take-over Partco's executive directors, Mr Wragg being the Chief Executive and Mr Scott the Finance Director. In addition, Partco had three non-executive directors. In the course of negotiations leading up to the acquisition, Mr Wragg and Mr Scott performed the central role in providing UGC with financial information about Partco's trading and profit expectation upon which UGC asserts that it relied in making its decision whether to make the offer and, if so, upon what terms.
It is the case for UGC that between 30 April 1999 and 22 June 1999 when the offer was declared unconditional, Mr Wragg and Mr Scott were aware of, but failed to disclose, a serious deterioration in Partco's trading performance and profitability with the consequence that UGC was unaware that conditions of the offer were not satisfied and it was deprived of the opportunity (which it would have taken) to withdraw the offer pursuant to a condition which entitled it to do so if there was a material change in Partco's financial circumstances. UGC pleads its claim against each of the defendants in fraud, or alternatively negligence.
Partco, which, prior to these proceedings had been sued by Mr Wragg and Mr Scott for wrongful dismissal following the takeover in an action commenced in the Birmingham District Registry (since consolidated with these proceedings), alleges that the defendants acted fraudulently and in breach of their fiduciary duties as Partco's directors, or alternatively in breach of their duties of care and skill during the period of the offer, relying upon this plea as justifying the dismissal of the defendants. Partco also seeks an indemnity from the defendants in respect of any liabilities which it has incurred to UGC as a consequence of their wrongful acts and omissions as set out in the Amended Particulars of Claim, and in particular any claim which UGC may bring against Partco for fraudulent, or alternatively negligent mis-statement.
By an application notice issued on 5 June 2001, the defendants sought:
(1) pursuant to CPR 3.4 and/or the inherent jurisdiction of the court, to strike-out those parts of the Particulars of Claim which alleged breach of an actionable duty of care owed personally by the Defendants to UGC on the grounds that the Particulars of Claim disclosed no reasonable grounds for bringing that claim ("the strike-out application"). The relevant passages of the Particulars of Claim were paragraphs 25, 63 and 64, the reference to "alternatively, negligently" in paragraph 65 and the words "alternatively negligently" in paragraph (4) of the Prayer;
(2) pursuant to CPR 24.2, summary judgment against Partco on its claims in paragraph 67 of the Particulars of Claim at paragraphs (1)-(3) of the Prayer, that it was entitled to dismiss the defendants by reason of the matters set out in the Particulars of Claim and be indemnified by them in respect of any loss it might sustain as a result of their breaches of duty ("the summary judgment application").
By his judgment (now reported at [2002] 1 Lloyds Rep 320) and paragraphs (1) and (2) of his Order dated 25 September 2001, Leveson J. dismissed both the strike-out application and the summary judgment application. By paragraph (3) he ordered that the claimants pay 30% of the defendants' costs of the strike-out application and by paragraph (4) that the defendants pay the claimants' costs of the summary judgment application. By paragraph (5) he granted leave to the claimants to file and serve amended particulars of claim to reflect the basis upon which he had decided the strike-out application. By paragraph (6) of the Order he granted permission to appeal against his orders in paragraphs (1), (3) and (5).
There is no appeal in respect of the judge's decision to dismiss the defendants' summary judgment application. There is before us the appeal of the defendants against the Judge's decision refusing to strike-out the claim, together with a cross-appeal by the claimants on the ground that the strike out application was not one which was suited to summary disposal, involving as it did complex questions of fact and law, prolonged argument and unresolved questions of fact. It is asserted that the judge should not have entertained the application unless he was satisfied (as in the result he clearly was not) that striking out would obviate the need for, or substantially reduce the burden of, a trial.
The basis of that assertion, advanced both here and below by Miss Gloster QC on behalf of Partco and UGC is that the strike-out application applies solely to the claim advanced against Mr Wragg and Mr Scott in negligence, and rests on a submission that the pleaded case advanced by Partco and UGC based on a duty of care owed personally to UGC when negotiating on behalf of Partco is unsustainable as a matter of law. However, no such submission is made in respect of the cause of action for fraudulent misrepresentation which will involve investigation of essentially identical facts and events and the states of mind of Mr Wragg and Mr Scott in an action of substantial length and in which the matters complained of by Partco and UGC by way of breach of duty are in any event raised by way of defence to the wrongful dismissal claims brought by the defendants in which they seek damages in excess of £1m. Mr Wragg and Mr Scott do not appeal against the judge's dismissal of their application under CPR 24.2 whereby they sought summary judgment against Partco on the basis that Partco had no real prospect of succeeding on its claims in paragraph 67 of the Particulars of Claim and paragraphs (1)-(3) of the Prayer, in which Partco rely upon the facts pleaded as constituting breaches of the defendants' employment contracts and/or fiduciary duties as directors of Partco with consequential claims for relief based upon such breaches.
It should be recorded in this introduction that it is in any event the plea of Mr Wragg and Mr Scott that at all material times they were acting honestly and with integrity, conducting themselves entirely in accordance with the wishes and support of Partco's Board and the advice of Close Brothers, Partco's merchant bank. They also contend that they acted honestly and in accordance with the terms of a Confidentiality Agreement which expressly exempted them from responsibility for the accuracy, completeness or reasonableness of any information supplied by them, to which I will turn in more detail below.
THE PLEADED CASE IN NEGLIGENCE.
The application to strike-out was mounted upon the basis of the draft Amended Particulars of Claim which couched the personal duty of Mr Wragg and Mr Scott as directors in general terms, based principally upon the provisions of the Financial Services Act 1986 and the applicable Listing Rules and City Code governing the behaviour of directors during the course of an acquisition. The judge indicated at an early stage, in response to a submission made for the defendants, that if the matters pleaded at that stage, and in particular the provisions of the regulatory code, were sufficient to impose a personal duty upon the directors in tort, it would affect every company take-over and he indicated a preliminary view that the pleadings were insufficient to disclose a viable cause of action. Since, however, it was apparent to him that the claimants sought to place substantial reliance on the personal relationship and dealings between UGC on the one hand and Mr Wragg and Mr Scott on the other, not merely to demonstrate breach of duty, but to ground the existence of such duty in the first place, he dealt with the application on the basis of a second draft Amended Particulars of Claim proffered by Miss Gloster to meet the initial objection.
In the extracts from the pleading set out below, I have highlighted in italics the substantial additional amendments made.
"21. In the course of the Acquisition and the preceding negotiations between Partco and UGC, Mr Wragg and Mr Scott were principally responsible for the provision of financial information to UGC regarding the trading and profit expectation of Partco.
21A At all material times, Mr Wragg and Mr Scott by their conduct, manner and demeanour in their dealings with UGC, respectively held themselves out to be highly experienced and professional company directors exercising reasonable care and skill in the performance of their duties and implicitly representing by their conduct, manner and demeanour that they were conducting themselves in accordance with the high personal...
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