Regent Leisuretime Ltd v Skerrett
| Jurisdiction | England & Wales |
| Judge | SIR PETER GIBSON,LORD JUSTICE MAURICE KAY,LORD JUSTICE BUXTON |
| Judgment Date | 21 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1184 |
| Docket Number | B5/2005/1972 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 July 2006 |
[2006] EWCA Civ 1184
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM PLYMOUTH DISTRICT REGISTRY
(THE HONOURABLE MR JUSTICE SIMON)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Buxton
Lord Justice Maurice Kay
Sir Peter Gibson
B5/2005/1972
THE SECOND APPELLANT, MR AMOS, APPEARED IN PERSON FOR ALL THE APPELLANTS.
MR B LIVESEY QC and MR M CANNON (instructed by Messrs Reynolds Porter Chamberlain LLP, Twyford House, Kennedy Way, Tiverton, DEVON, WX16 6RZ) appeared on behalf of the Respondents.
Judgement
1. This is an appeal by the first claimant, Regent Leisuretime Limited ("the Company") , the second claimant, Stephen Amos, and the third claimant, Peter Barton, from the order made on 13 July 2005 by Simon J, by which the judge dismissed the appellants' claim against the second defendant, Kenneth Pearson, after a trial of liability only in a solicitor's negligence action. The first defendant, Phillip Skerrett, was not properly served and the proceedings against him were struck out earlier. The judge refused permission to appeal, as did Hallett LJ on paper, but at an oral hearing Latham LJ granted limited permission to appeal.
The issues to which this appeal gives rise are first, the question whether the judge in finding that the Company did not retain Mr Pearson and was owed no duty of care by him was wrong and secondly, and more substantially, the extent of the duty of care owed by a solicitor to his clients, who are the directors and shareholders of a company, and his clients seek to recover damages for deceit for the loss suffered by them through the diminution in value of their shareholdings, when experienced specialist counsel has been instructed by the solicitor and has advised on pursuing the damages claimed but has not advised joinder of that company.
The Company was formed by Mr Amos and Mr Barton early in 1991. They are the sole directors and shareholders of the Company. In March 1991, it acquired a holiday complex in Cornwall with the aid of a short term loan from County NatWest Limited ("the Bank") . In early 1992 it sought a loan of £2,025,000 from the Bank to purchase two further properties and to refinance the earlier loan. The Bank was prepared to make the loan subject to two conditions: (1) an independent valuer should value at a forced sale value the three properties at not less than £3.5 million; and (2) Mr Amos and Mr Barton should give personal guarantees of the Company's liabilities to the Bank, and charges over Mr Amos's and Mr Barton's matrimonial homes should also be given.
The Bank originally instructed the valuers to value the three properties, both on an open market basis and on a forced sale basis, but an employee of the Bank, Mr Murphy, changed the instructions without telling Mr Amos and Mr Barton and the valuers prepared the valuation on an open market basis only. Mr Murphy informed Mr Amos and Mr Barton that the valuation was "just enough", thereby representing to them that the properties had been valued at not less than £3.5 million on a forced sale basis. Had that been the basis of the valuation, the value would have been reduced by between 30 and 50 per cent.
The transaction went through on 1 April 1992. Thereafter the Company defaulted on its loan. The Bank in July and August 1993 demanded repayment from the Company and the guarantors. When payment was not made, the Bank on 31 August 1993 appointed administrative receivers of the Company. On 6 September 1993, a date of significance for limitation reasons, Mr Amos ascertained from the valuers that their valuation had been on an open market basis.
6. In 1993, Mr Amos and Mr Barton consulted Mr Skerrett, who was in practice as a solicitor on his own, about the possibility that they or the Company might make a claim against the Bank for fraudulent misrepresentation. Mr Skerrett sought the advice of counsel. Mr Andrew Geddes advised in conference and also on 22 October 1993 in writing in strong and clear terms that Mr Amos and Mr Barton could not as shareholders recover damages for damage to the Company resulting in a reduction in the value of their shareholdings, but that they could bring proceedings in the Company's name if they were prepared to give the Company an indemnity against costs, and any damages recovered by the Company would be available to be meet prior charges.
Mr Geddes was appointed to the Bench in 1994. On 7 November 1994 Mr Skerrett was instructed by Mr Amos and Mr Barton to seek the advice of new counsel, Mr Dirik Jackson. On 2 December 1994, Mr Jackson advised in conference that Mr Amos and Mr Barton could not claim for diminution in the value of their shareholdings due to the diminution in value of the Company's assets. He referred to the decision of this court to that effect in Prudential Assurance v Newman Industries Ltd (No 2) [1982] Ch 204. He also advised that if Mr Amos and Mr Barton were to bring an action in the name of the Company, they would have to give an indemnity as to costs.
On 13 February 1995, the Bank commenced proceedings in the Chancery Division under the guarantees. Mr Jackson drafted, and on 24 April 1995 the guarantors served, a defence and counterclaim. In the latter, damages for fraudulent misrepresentation were claimed and included in it was a claim for diminution in the value of Mr Amos's and Mr Barton's shareholdings. Mr Charles Macdonald QC was then instructed on behalf of Mr Amos and Mr Barton. He gave advice in a lengthy conference lasting three and three quarter hours on 22 July 1996, with Mr Amos and Mr Barton present. He advised that the claim for diminution in value of the shareholdings was misconceived.
On 10 June 1997 he advised in conference again. He supplied Mr Skerrett with a long note in advance of the conference. In it he said he had again considered the issue of the claim for diminution in the shareholdings' value and that his opinion remained the same. His note was faxed to Mr Amos by Mr Skerrett and they discussed it by telephone for an hour on 7 June and again at a meeting lasting one and a half hours on 9 June. At the conference on 10 June Mr Macdonald advised that the counterclaim was unsustainable.
After the conference Mr Macdonald faxed a revised version of his note to Mr Skerrett. Again he addressed the counterclaim and said that the shareholders had no personal right to the loss suffered by the Company. He said that the problem was likely to be a practical one, namely, that the Company could only sue by a lawyer and did not qualify for legal aid. Unless the directors could raise the necessary legal fees, the Company could not in practice enforce its rights. He suspected that that might apply in this case. That revised note was faxed on 11 June 1997 to Mr Amos and Mr Barton and discussed by Mr Skerrett with Mr Barton.
Mr Macdonald represented the guarantors when the Bank's action on the guarantees was tried by HHJ Weeks QC, sitting as a deputy judge of the Chancery Division, in January 1998. On 20 February 1998 the judge gave judgment for the Bank and dismissed the counterclaim. While he found that Mr Murphy did make the false representation that the value was at a forced sale value, knowing that to be untrue, the judge found that the misrepresentation was not intentional and that the guarantors had not relied on it.
Mr Amos and Mr Barton were unhappy with Mr Macdonald's conduct of their case. They expressed their dissatisfaction to Mr Skerrett. He drafted a letter of complaint to Mr Macdonald, although it is not clear that that letter was sent. However, it indicates by its terms that Mr Amos and Mr Barton were well aware of the difficulty of their claiming damages for diminution in the value of their shareholdings and maintaining that claim until the trial. That dissatisfaction with Mr Macdonald led to Mr Jackson being instructed again. He advised favourably on an appeal and drafted the notice of appeal.
In September 1998, the Office for the Supervision of Solicitors intervened in Mr Skerrett's practice. Mr Pearson's firm, Blight Broad Skinnard (Saltash) , now called Blight Skinnard, took over responsibility for Mr Skerrett's then current files, which left the previous clients of Mr Skerrett with the option of deciding whether or not to instruct the new firm.
Mr Pearson is an experienced solicitor who qualified in 1974 and has much experience of litigation. He was only able to recover the files relating to Mr Amos's and Mr Barton's dispute with the Bank a couple of days before Christmas 1998, the files apparently being needed for taxation of costs prior to that. He then started to read those files. He wrote to Mr Amos and Mr Barton in January 1999, and after a meeting with them they agreed to retain him. Mr Pearson continued to instruct Mr Jackson. Mr Pearson believed that he was acting for them only and that he was not acting for the Company. The Company had come out of receivership on 30 January 1998. But on 17 November 1998, the Company was struck off the register as a defunct company under section 652 of the Companies Act 1985 and dissolved seven days later.
At the hearing of the appeal from Judge Weeks' order, Mr Jackson appeared for the guarantors. On 14 July 1999 their appeal was allowed by this court (Roche and Morritt LJJ and Lindsay J) which, unusually in a case where the trial judge has found no fraud, held that it was clear that the misrepresentation had been intentional and so the misrepresentation by Mr Murphy had been...
To continue reading
Request your trial
-
Greene Wood and McLean v Templeton Insurance Ltd
...or advice may with the benefit of hindsight be shown to have been wrong “but hindsight is no touchstone of negligence”. 129 In Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, the Court of Appeal had cause to consider the position where solicitors were sued for negligence alleging t......
-
Hossein Mehjoo v Harben Barker (A Firm)and Another
...retainer and any duty of care to be implied must be related to what he is instructed to do." (See, also to the same effect, Regent Leisuretime Limited v Skerrett [2006] EWCA Civ 1184 [34]). 128 In the present case, in order to establish the obligation of the Defendants to give tax advice ev......
-
Hossein Mehjoo v Harben Barker (A Firm), Harben Barker Ltd
...limits of the retainer and any consequent duty of care therefore depend on what the professional is instructed to do: see Regent Leisuretime Ltd & Ors v Skerrett & Anor [2006] EWCA Civ 1184; [2007] PNLR 9. An accountant in the position of HB was not therefore under a general roving duty to......
-
Jeffery Maxwell Read(Plaintiff) v Diana Mary Burns (First Defendant)
...[2016] ACTSC 13 Read v Burns (t/as Diana Burns Solicitors) and Prime Property Investment Pty Ltd and Knell [2013] ACTSC 83 Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184 Robertson Street Properties Pty Ltd v RPM Promotions Pty Ltd [2005] QCA 389 Smith v Samuels (1976) 12 SASR 573......