Richard Terence Percy v Merriman White
| Jurisdiction | England & Wales |
| Judge | Sir Julian Flaux C,Lady Justice Andrews |
| Judgment Date | 12 April 2022 |
| Neutral Citation | [2022] EWCA Civ 493 |
| Docket Number | Case No: CA/2021/000474 |
| Court | Court of Appeal (Civil Division) |
and
[2022] EWCA Civ 493
Sir Julian Flaux, CHANCELLOR OF THE HIGH COURT
Lord Justice Lewison
and
Lady Justice Andrews
Case No: CA/2021/000474
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (ChD.)
Chief Insolvency and Companies Court Judge Briggs (sitting as a judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Patrick Lawrence QC (instructed by Reynolds Porter Chamberlain LLP) for the Appellant
Michael Pooles QC and Henry Bankes-Jones (instructed by DAC Beachcroft LLP) for the Respondents
Hearing dates: 29 and 30 March 2022
Approved Judgment
Introduction
The appellant David Mayall appeals (with the permission of Newey LJ) against the Order dated 1 February 2021 of Chief Insolvency Judge Briggs (sitting as a Deputy High Court Judge of the Chancery Division). By that Order, the judge gave judgment for the respondent, Merriman White (“MW”) on its contribution claim against Mr Mayall under the Civil Liability (Contribution) Act 1978 (“the 1978 Act”).
The contribution claim was made following the settlement by MW of the claim made against it by its former client Mr Percy. Mr Percy had originally sued both MW and Mr Mayall (who was the barrister instructed by MW on a derivative claim) for negligence. He discontinued his claim against Mr Mayall but continued against MW which settled by payment to Mr Percy of £250,000. The judge held that MW was entitled to 40% contribution from Mr Mayall.
Factual and procedural background
In 2007 Mr Percy and his business partner, Mr Trevor, set up a joint venture vehicle, Seven Holdings Limited (“Seven”), to purchase and develop certain properties in Kent. The shares of Seven were held by Langley Ward Limited (“Langley Ward”) (owned by Mr Percy) and Madison Jay Limited (owned by Mr Trevor) on a 50/50 basis. As a result, disagreement between the pair would lead to deadlock. No shareholder agreement was ever signed which would have defined their rights and responsibilities.
Mr Percy and Mr Trevor fell out badly. There were a number of matters which soured their relationship but principal amongst them was that Mr Percy considered that Mr Trevor had misappropriated large amounts of money from Seven covertly. Seven was responsible for the development of two properties in particular:
(1) 2 Austin Avenue purchased for £1,025,000 in February 2007. Substantial works were undertaken involving renovation of an existing bungalow and the building of two new residential properties;
(2) 30 Sundridge Avenue purchased in February 2008 for £840,000. The vendor was a Julian Beale who was also concerned with a third property referred to below.
Mr Trevor was also developing for his own account a property at 7 Mavelstone Close which he bought from Mr Beale, who also owned 8 Mavelstone Close. That purchase took place at about the same time as Seven purchased 30 Sundridge Avenue. 7 and 8 Mavelstone Close were extensively developed in 2008 and 2009. Mr Percy was suspicious of these arrangements between Mr Trevor and Mr Beale and considered that Mr Trevor was developing his property using Seven's money and assets. In early 2010, Mr Percy instructed MW, where the sole practitioner was Mr St John Murphy, the second defendant. The matter was handled by an assistant solicitor Mr Jerome O'Sullivan, who had previously been an insurance loss assessor. He commenced an investigation, pursuing disclosure of documents which he described in his evidence as like pulling teeth, since Mr Trevor had arranged matters so that the company's books and records were under his control. Mr O'Sullivan concluded that Mr Trevor had misappropriated at least £450,000 of Seven's money.
MW instructed Mr Mayall to advise. He was a senior junior having been called to the Bar in 1979 and was a tenant at Lamb Chambers in the Temple. At this stage, Seven was more or less at the end of its life with only the two new properties at Austin Avenue remaining to be sold and Mr Mayall had to advise as to what course of action would best resolve the problem of recovering what Mr Trevor had misappropriated. As Mr Patrick Lawrence QC on behalf of Mr Mayall submitted, there were three options: (i) to put the company into liquidation and leave recovery of what had been misappropriated to the liquidator; (ii) a derivative claim under sections 260 to 263 of the Companies Act 2006 by Langley Ward as shareholder on behalf of Seven against Mr Trevor and (iii) an unfair prejudice petition under section 994 of the Companies Act, although no-one recommended this last option. Mr Mayall advised Mr Percy to proceed by way of a derivative claim, which would require the permission of the Court to proceed. The derivative claim was issued on 1 November 2010 and Mr Mayall settled Particulars of Claim setting out allegations of breach of duty by Mr Trevor based on Mr Percy's instructions.
On 21 December 2010, there was a mediation before Mr Kallipetis QC. Mr Mayall did not attend and the mediation was conducted on behalf of Mr Percy by Mr O'Sullivan. Mr Trevor offered to settle for £500,000 inclusive of costs and Mr Percy counter-offered £750,000 plus costs. At that time his costs were about £105,000. The counteroffer was rejected. The gap between the parties was not that wide but was not able to be bridged.
The following day MW sent instructions to Mr Mayall to advise in a conference to be held on 5 January 2011. The matters on which his advice was sought included: (i) whether there was any merit in Mr Trevor's threat evidently made at the mediation to apply for a just and equitable winding up of Seven and (ii) whether Mr Percy should press on with proceedings with a view to obtaining prompt and comprehensive disclosure.
At the conference on 5 January 2011, Mr Mayall began by advising that as the company was effectively deadlocked, winding up the company was one of the options open to the Court. He said that as a liquidator would charge quite substantial fees it was very much the nuclear option as it would prejudice both shareholders equally.
There was then a discussion of whether Mr Trevor had made a director's loan to the company, though Mr Percy was adamant he had not. By way of overview Mr Mayall accepted that it was known that there was something fishy in the affairs of the company and there was no doubt Mr Trevor had used the resources of the company for private purposes. However he pointed out that the maximum amount that could be achieved by Mr Percy was limited to the maximum net profit previously discussed, evidently a reference back to the position if Mr Trevor were owed money by the company by way of director's loan.
In relation to the prospects of success at trial, Mr Mayall said that it very much depended on the quality of Mr Percy's evidence. There was then a discussion about what would be a reasonable settlement. Mr O'Sullivan pointed out that while counsel was pointing out the risks and costs of going to trial, Mr O'Sullivan recommended continuing with the proceedings until Mr Trevor came up with an improved offer. It was agreed by Mr Mayall, Mr O'Sullivan and Mr Percy that a reasonable settlement figure would be somewhere between £400,000 and £750,000 plus costs but no final decision would be made until there had been further negotiations. Mr Percy indicated that he was prepared to accept £670,000 plus costs. Mr Mayall reminded Mr Percy that if he went to trial and lost or got less than whatever was the last protective offer Mr Trevor made before trial, he would end up paying both sides' costs. Mr Mayall agreed though that they should press on with proceedings with a view to obtaining comprehensive disclosure. There was a discussion at the conference about making a Part 36 offer and it was agreed to reiterate the last offer at the mediation, £750,000 plus costs, by way of a Part 36 offer.
On 13 January 2011 a few days after the conference there was a telephone discussion between Mr O'Sullivan and Mr Mayall in which the latter expressed a concern that Mr Percy would not be as good a witness as he thought. Mr O'Sullivan pointed out that Mr Mayall should be more positive in the future as Mr Percy was concerned that he would be too pessimistic. While the concerns Mr Mayall had were real, they were still a long way from trial.
A Part 36 offer was made to Mr Trevor's solicitors but, in the event, at the behest of Mr Percy, it was for £950,000 plus costs, a much higher amount than agreed at the conference. On 28 January 2011, there was a telephone call between Mr O'Sullivan and Mr Percy in which Mr O'Sullivan explained the discussion he had had with Mr Mayall after the conference. Mr Percy expressed the view that he could be as tough as Mr Trevor and if necessary was prepared to go all the way. Mr O'Sullivan cautioned him against the expense of such an approach but he was adamant that he would not be the one to blink first.
The hearing of the application for permission under section 261 of the Companies Act 2006 was fixed for 25 May 2011. It was strenuously opposed by Mr Trevor who sought instead a winding up of the company. In an email the week before the hearing, Mr O'Sullivan told Mr Mayall that Mr Percy had a theory that Mr Trevor had made such an effort to get the claim thrown out at an early stage because he had a lot to hide that they had not identified to date. Mr O'Sullivan continued: “If we win next week, Richard reckons that they will come up with a much better offer.”
The permission application was heard by David Donaldson QC sitting as a Deputy High Court Judge...
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Professional Liability Brew: Contribution Claims And Professional Negligence Disputes (Video)
...(Contribution) Act 1978 in the context of professional negligence disputes, as well as the recent decision in Percy v Merriman White [2022] EWCA Civ 493. Watch a recording of the webinar The content of this article is intended to provide a general guide to the subject matter. Specialist adv......