Rodney Channon (t/a Channon & Co) v John Ward (t/a Ward Associates)
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Cotter |
| Judgment Date | 12 May 2015 |
| Neutral Citation | [2015] EWHC 4256 (QB) |
| Docket Number | Case No: 1TQ01495 |
| Court | Queen's Bench Division |
| Date | 12 May 2015 |
2015 EWHC 4256 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
EXETER DISTRICT REGISTRY
His Honour Judge Cotter Q.C.
Case No: 1TQ01495
Hearing dates: 10 th, 11 th March, 22 nd April 2015
His Honour Judge Cotter Q.C.
Introduction and outline facts
The Claimant was a successful and well respected chartered accountant with a private practice, Channon & Co, which had a significant turnover and a loyal client base. At all material times for the purposes of this claim the practice was not registered to give financial advice and the Claimant repeatedly told his clients that he did not give such advice.
The Claimant was also personally involved in significant property development projects and was the director of a number of companies. In the run up to 2004 his involvement in property development had brought healthy returns and he had high hopes for the future. He was a director of a company called Mill house Partnership Limited ("MHP") together with two others, Mr Bromage and Mr Morris. The company had ambitious plans for purchase and development of property with the aim of no doubt very significant profit, however it required additional funds to put such plans into practice.
The Claimant who described himself as an accomplished networker, had as a matter of longstanding practice, referred any clients who wanted investment advice to a friend, Mr Armitage, who was familiar with at least some of the projects undertaken by the companies with which the Claimant had been involved, and I think likely, the significant profits that had been made. In any event he knew of MHP's proposed projects and suggested to his then girlfriend, later his wife that she discuss investment in MHP with the Claimant as she had spare capital, having previously been involved in investing in property. A meeting took place at the Claimant's home and Mrs Armitage (as she now is) brought along a friend Ms Stevens. Neither Mrs Armitage or Ms Stevens were clients of Channon & Co. or had never previously sought professional advice from Claimant. The Claimant stated that MHP was looking for capital and described what the company was doing. Both Ms Armitage and Ms Stevens decided to commit capital to the projects. A further meeting took place and agreements were subsequently drawn up by Channon & Co on the instruction of MHP and signed.
Subsequently five other individuals, who were also clients of Channon & Co, also decided to commit capital to MHP after discussions with the Claimant. Again agreements were subsequently drawn up by the practice on the instruction of MHP and signed. The total invested approached £1 million.
Sadly for all concerned and for so many others the financial crisis then hit the property markets. MHP could not honour its commitments under the agreements. Meetings took place between the officers of the company and the investors with heated exchanges. It was clear that the sizeable investments made would not be repaid. The Claimant had also personally lost very significant sums.
A decision was taken by Ms Stevens, presumably after legal advice, to threaten to bring an action against the Claimant alleging professional negligence. A letter before action was sent to the Claimant in October 2009.
Although he believed that at all times he was acting as director of MHP and not as an accountant the Claimant sent through the details of Ms Stevens' claim to the Defendant, his long term insurance broker and also a friend, who operated a small "one man band" brokerage. The Claimant subsequently received and passed on to the Defendant details of claims from the other individuals, investors in and now creditors of MHP ("the investors"), who were then acting as a group. Together they were seeking approximately £1.8million.
However, the Defendant had not put professional indemnity insurance cover in place since 2006. The Claimant thought that it was in place for the years following 2006 and the Defendant even supplied policy numbers to the Claimant so that he could enter them on his annual professional returns; this despite the fact that no insurance cover existed. How and why the Defendant came to fail to obtain cover or act as he did is unclear. His wife was seriously ill, subsequently diagnosed with cancer, and it appears that he was under pressure and failing to cope. In any event there was no insurance policy in place and so no insurer to assist the Claimant.
The seven individual investors then issued claims against the Claimant. The Claimant defended the claims brought by the investors with some legal assistance. He entered fully pleaded defences, stating that he had never given investment advice, rather only information as to what the company was doing and that in any event at all times he was clearly acting as a Director of the company, as he had told the individuals, and not in his professional capacity as an accountant with Channon & Co.
The investors proceeded with the assistance of solicitors, Bynes & Co and Counsel, Mr Adams. The Claimant told the investors that he had very limited funds and produced a schedule of assets. The investors knew by late August /early September 2010 that the Claimant was uninsured, but pressed on. The Claimant did not seek to join the Defendant into the action brought by the investors as a part 20 Defendant seeking a contribution or an indemnity on the basis of a failure to ensure that insurance was in place. However a claim alleging negligence against Defendant was issued on or around 23 rd November 2011.
A settlement was reached in the action brought by the investors against the Claimant as set out in a consent order dated 19 th June 2012. By that order judgment was entered for each investor on the issue of liability with damages to be assessed. The Claimant also authorised the investors to pursue the then ongoing action against the Defendant, and agreed to them taking the proceeds of the action, to use his best endeavours to assist with the claims and to indemnify the investors in respect of all costs incurred pursuing the claims and any subsequent claim against the Financial Services Compensation Scheme ("FSCS").
It is an important feature of this claim that the Claimant has subsequently stated that he believed and indeed still believes that the investors' claims against him were wholly unmeritorious and that he stands by the content of his defences, but that his financial position was such that he was on the verge of entering an IVA and could not afford to defend the claims so considered settlement his best option, particularly as by virtue of the agreement he was able to continue in practice and was only required to pay a limited sum of £85,000 over a period of time with annual payments of £10,000. So despite the consent agreement the Claimant was and remains adamant that he was not liable to the investors. He did not seek to negotiate on the overall sum sought by the investors, as it was to a large degree academic. He agreed to commit to beast endeavors in an action against the Defendant as there was hope that if a judgment could be obtained against the Defendant, he could then be made bankrupt if, as was overwhelmingly likely he could not pay the sums agreed by the Claimant with the investors (as set out in a further order of 5 th December 2012) and the FSCS would then step in and make payments to the investors.
The Defendant, who was clearly struggling in both his personal and professional life failed to respond to the claim against him in time and judgment was entered on 16 th April 2012. He subsequently tried to set judgment aside on 8 th September 2013, principally relying upon his wife's serious illness and the effect that it had upon him, but was unsuccessful. Having now had the benefit of considering all the relevant evidence, including oral evidence from the Defendant it was to his benefit that liability was so swiftly concluded as he was almost certainly would have been found liable and he would not have been able to meet the consequential costs bill.
Following his unsuccessful application on by what Mr Dyson referred to as "the skin of his teeth", the Defendant, who is now well over seventy years of age, managed to avoid a bankruptcy order arising out of his costs liability to Claimant. So the Claimant and the seven individual investor claimants in the original action became aware, if not already well aware, of the Defendant's inability to meet any significant judgment, let alone one for £1.8 million. However, as the investors believe that if the Defendant is made bankrupt they will be eligible for payments from the FSCS the claim has been vigorously pursued. As I have set out the Claimant is indemnifying the seven individual investors as to their costs, so there is little or no incentive for them to do otherwise than pursue the action regardless of its merit.
It is an usual, and as I stated at the outset of the hearing in my view somewhat worrying, aspect of this case that notwithstanding that there is a Tomlin agreement in force between the Claimant and the investors with subsisting obligations, the Claimant's case has been conducted by the same solicitor and Counsel who previously acted and no doubt continue to act for the investors against him in the action leading to that agreement. I shall return to this in a moment.
So the position reached in this claim was that the Claimant had a judgment against the Defendant in default of a defence in respect of the claim for breach of duty in failing to ensure that insurance was in place. What remained were the causation and quantum aspects of the Claimant's claim....
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Rodney Channon (trading as Channon & Co) (Claimant/Appellant) v John Ward (trading as Ward & Associates)
...investors was £1,045,000. Much more detail of the manner in which the investments were made is set out by the judge in his judgment, [2015] EWHC 4256 (QB), but it is unnecessary to go into further detail here. 7 Some payments of interest were made on the loans, but as a result of the catas......